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Awhile back we heard Flo Rida and T-Pain were interested in using Zoosk in a single for their new album! Obviously we were flattered and got super excited about it. Then the artists went to work and did their magic. The results just came out and wow! We couldn’t be happier. This is a catchy song :)

This is how the song came about

Flo Rida was in the studio with Pain doing a song called “I’m Dancin'”, which is featured on T-Pain’s next album. One of T-Pain’s boys, Tay Dizm, was talking about how he met some fine girl on Zoosk. He was talking all kind of mess about how good she looked and that she actually had good credit. T-Pain responded from the booth and was like “I need me a Zoosk Girl“. The jokes then turned into a song and it went from there. Since the song was clearly a smash, we decided to work something strategic out with Zoosk to amp the promotions for the song, which is now Flo’s Hype Single off his album The Only One”.

Commented Poe Boy Music Group CEO Elrin “E-Class” Prince

Can’t wait to see how high in billboard rankings this song is going to go!

From the early days of internet, web email services such as Hotmail and Yahoo Mail have ruled the virtual highways. every transaction one way or another has been going through these services. individuals communicate with their friends and family through them; viral messages/pics/videos are distributed through these channels; businesses reach their customers through them both for promotional campaigns and for transactional information; businesses market through email by buying email lists and sending promotional material to prospective customers.

Playing this pivotal role in our internet lives has given major email providers a significant power in shaping the online universe. With a reported 250 million mailboxes each, Hotmail and Yahoo Mail have been the elite in this universe and have brought significant riches to their owners. This is exactly why Google wanted a piece of this game and introduced Gmail in 2004.

But in the past year or so an interesting shift has been happening. Many of the activities that users were performing through their emails is now shifting to social networks which provide a more “social” version of the same. Here are a few simple examples:

  • sending emails to family and friends == writing on their Facebook wall
  • email photos as attachment == uploading photos to Facebook
  • passing chain emails on == inviting friends to apps that do so on your behalf
  • taking quizzes and sharing results == filling up quizzes on social applications

This shift is not just limited to personal interactions. Relationships that businesses were establishing with individuals through emails for many years are also moving to (or being augmented by) their social network equivalent:

  • signing up with email and validating it == signing up with Facebook Connect
  • receiving transactional email == receiving notifications on Facebook
  • signing up for promotional emails == becoming a fan of the brand’s page
  • receiving promotional emails == status updates from pages on Facebook
  • viral growth through address book import == viral growth through Facebook invite

a very immediate implication of this shift is visible in what businesses go after

  • buying email lists for promotional campaigns == buying applications with access to millions of users
  • white listing business’ email with Hotmail/Yahoo == verifying business’ Application with Facebook (i am sure verification for pages will follow soon)

Obviously a lot of these activities are simply better when you add a social angel to them. Uploading photos to Facebook and tagging friends in it is a ton easier than composing an HTML email and writing captions around images and sending that to your friends. It’s a ton more fun to post that stupid quiz’s results on Facebook and see how your friends react. However, a more intriguing element in the social version of these interactions is the speed at which they happen. When you post a photo on Facebook you will receive your first comment/like/etc in a matter of minutes. Doing so through email usually gets your first reaction in half a day or so (talk about immediate gratification). The same holds true for business interactions. At Zoosk, we see this speed difference very clearly: users respond to notifications within minutes but emails usually take 12 hours or so for impact.

This speed is particularly intriguing and at times surprising. Is it because our email boxes are way more cluttered than our Facebook notification window? I find that hard to believe. There is already a considerable amount of “spam” in our Facebook notifications and feeds. So, why do consumers react to pings on Facebook so much quicker? I don’t know that answer to this question yet. Here are a few of my theories (leave your theories in comments)

  • sense of urgency: my notifications/feed stories/etc will go away. I need to do something now
  • state of mind: I am on a social network to sink time, so I am more open to triggers
  • social element: my friends will see my action and potentially participate with me so I am more inclined to do something

right now it seems like these two systems are running in parallel. I receive an email for almost every Facebook notification that I receive. But I suspect that this balance won’t last for long. Especially if the effectiveness and speed of this new medium continues to be superior to email as we push more and more interactions onto it.

[side note: This is a critical time in web email services' life. If they are not careful, their power could diminish very quickly. Hotmail and Yahoo are both responding to this shift with "Windows Live Network" (or whatever the social element of hotmail is called) and "Yahoo Connections" both of which are trying to bring social (as in my friends and family) to their experience. I am not convinced that just capturing my social graph (which by the way they both do a horrible job of it) is going to be enough. We recently saw Google take a more ambitious approach to evolving email with their Wave project. The big three internet companies have failed to get social networking right and now they are seeing their grip on email (the other starting point for our surfing habits besides search) is eroding because the same social networks are replacing them.]

As for businesses, this shift/battle means that they need to perfect both mediums until (or if) a clear winner emerges. You still need to whitelist your email servers and also get your Facebook application verified. Yes, this means more work, but you have more opportunities to stay connected to your users. The trick now is to make sure your communication strategy takes the special characteristics of each medium into account and uses them appropriately.

Yes, I said it. Everybody involved knows it. It’s the dirty little secret of social media ecosystem. Log onto Facebook, MySpace, or any social application on these platforms or anywhere else. The majority of the ad units you see are for scam related offers. The infamous “crush ads” are everywhere. The whole purpose of these ad units is to get the consumer to enter their cell phone number and usually without realizing it subscribe to a monthly subscription on their mobile phone.

These ads are so profitable that they usually outbid any other advertisers on any network. If Google was not fiercely combating them, the would take over the overall online advertising universe. The actually come in a very few formats that I am sure you have noticed them

  • Crush Ads: Someone has a crush on you!
  • IQ ads: What is your IQ?
  • Age Ads: How old are you really?
  • and a few more “creative” ones

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For the past few years online advertising has been the de-facto monetization mechanism for online businesses that do not sell physical goods. As a result very few companies have actually focused on receiving payments directly from consumers. This lack of attention really shows when you try to figure out a holistic approach to online payments for your business. The short news: global online payment systems are a mess especially if you are not a 10 year old S&P 500 company!

As this economic downturn puts pressure on more and more web startups to skip the dwindling online advertising revenue stream and go directly to the consumers more entrepreneurs will get exposed to this mess. Since I have been dealing with this problem for almost a year now, I thought I should just summarize what is wrong with this ecosystem. Hopefully this post provides some guidance to fellow web entrepreneurs that are/will go through the same and save them some time.

I am also going to propose some basic requirements for anybody who wants to solve this problem. My hope is that somebody in the payment business will take a look at this list and hopefully provide a product that satisfies these requirements. I really believe that there is a huge opportunity here and whoever cracks this problem properly will benefit immensely. If I was not busy building Zoosk, this would be on the top of my list of opportunities to tackle.

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Recently vice president of product marketing at Facebook, Chamath Palihapitiya, spoke about the Facebook developer platform at the TieCon conference. Some of the figures what were quotes by the attending press caught my attention.

And about 33 percent of Facebook application makers reported profits of up to $500,000 a month. Finally, at least one-quarter of the applications running on Facebook have 100,000 active daily users.

Looking at adonomics or other Facebook application trackers, you can see that only 50 Facebook applications boost 100,000 and above daily active users. By Chamath’s math, Facebook only has 200 applications! I guess MySpace platform is not doing too bad in retrospect.

In reality, Facebook has some 25,000 applications on it’s platform. and only 0.2% of those have more than 100K daily visitors. I am just hoping that Chamath was miss-quoted, and that he and his team don’t really think every application on their platform is thriving.

And imagine if 33% of Facebook applications were making half a million in profits every month. That would put the profit of just this 1/3 of applications at around $50 million dollars a year! That should put their revenue in the $150 million range, exactly how much Facebook made in 2007!
Simply AMAZING ;-)

As an internet entrepreneur, the decision when to turn on your properties monetization engine is not a trivial one. At first glance it seems like you should open the cash faucet as soon as possible. But sometimes, it could be tricker than simply the ability to do so. I will try to summarize the counter arguments below:

Monetization and Growth

Regardless of your business plan and monetization strategy, you could almost always argue that turning the money engine on slows down your growth. The level of slow down obviously varies depending on your audience, and your money making technique, but it will slow it down. An easy example is subscription services: by turning subscription on, you should expect about a 90% or more drop in your user base accessing the paid sections. Even if simple registration decreases your audience.

You might say that our property only uses advertising to make money and that doesn’t slow down growth. But think about it for a second. Even though users are now accustomed to seeing ads on sites, if the ad directly doesn’t increase site’s
value (think ads on Google search results that might give you what you were looking), users don’t particularly don’t like them. A less pleasant experience usually results in higher probability of abandonment (again the value I am giving up has a lot to do with this rate).

But even more important is the attention capital that you are giving up. Entrepreneurs sometimes just think about the real estate that they are giving up to ads and potential the less pleasant user experience. But you also give up some of your users attention. That 1% CTR that brings you some money is built but taking away a percentage of your users’ attention from your site and to advertisers message. The question here is whether you could use that attention and click to increase your own growth rate. I believe this is a very important question for any entrepreneur to answer. Thanks to my friend, Touraj Parang, we at Pollection are thinking much harder about it.

Monetization and Valuation

So what if you give up some growth for good chunk of cash? Well as long as you make that decision consciously, there is no problem with it. However, if you are running a venture financed company and are thinking about future rounds of financing, this decision will have deeper consequences.

You need to understand how your financiers value your company in your next round of financing. If all they care about is your user base growth trajectory, then sacrificing even 1% daily growth for paying some of your bills are going to lower your valuation in a few months in a very big way.

Taking the Middle Ground

One might decided to take the middle road: split the focus half and half between monetization and growth (or some other combination). The problem with this split decision is that you do not have a razor sharp focus on either. So you won’t optimize your user experience 100% for neither growth nor monetization.

As a result, your growth rates and your monetization yield (let’s say your advertising eCPM) are not stellar. Now you are in a really bad situation when you talk valuation with your future VC since they will ding you for both inadequacies.

What is the consensus?

Last week I attended an event at Plug & Play Tech center on the topic of monetization for widget companies. The event was mostly a networking opportunity, plus a presentation by CoFounder of Hi5, Akash Garg. It also included demos by a number of startups including Pollection. At the event, I got the opportunity to chat with multiple founders and CEOs about the topic and it seems that there is sense that everybody wants to postpone monetization even though they can make money today in exchange for faster growth. They funny part is that everybody prefixes this assertion with “it might sound like bubble talk but…”. This sentiment was very well captured when at one point Akash said (paraphrased): My biggest regret is that we went for monetization too early, sacrificing aggressive growth.

We at Pollection are looking into different strategies when it comes to this question very carefully. I really don’t think there is a clear answer. As always it depends on your circumstances and your objects. In my opinion what matters is that you are conscious about the choices you are making in the context of tradeoffs described above.

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