Insider Chatter by Donna Bogatin

Think Mark Zuckerberg’s Beacon is scary? Reid Hoffman has some user “tracking” of his own in store.

In November, The Washingotn Post reported the sad tale of how Facebook “ruined” Facebooker Sean Lane’s Christmas when Mark Zuckerberg conspired with Overstock to alert his “friends,” including his wife, of his happy (supposedly surprise) purchase of a diamond ring, for his wife.

Reid Hoffman may soon have some (serious) unwelcome surprises of his own, for the thousands of companies represented within the “rich profile data” of “17 million professionals” hailed by LinkedIn as the “largest group of business decision makers on the Web.”   

LinkedIn’s Mike Gamson is touting an impending fee-based “Research Network” aimed at capitalizing on the reams of data LinkedIn houses on those millions of people:

The service will help hedge fund managers and investment banks find people who used to work at a company they’re interested in, or even who is working for a customer of a company they are interested in. (as cited by eWeek)

In other words, insider corporate intelligence, or espionage:

Let’s say I’m thinking about making an investment in a producer of product X. I might want to speak to people that sell that product, people that buy that product, or that used to work at that company as part of my research process to have a better understanding of how valuable that product is.

BUT, “let’s say” the “producer of product X” does NOT want current or past employees talking to hedge funds and investment banks about its proprietary, confidential, insider goings on. LinkedIn’s financial incentives to its “17 million professionals” may nevertheless be hard to resist. Gamson boasts, “If we can begin to help our members make money and help our clients find the right people, that’s when you create value on both sides and we like those situations.”

Corporations about which LinkedIn users divulge insider information to hedge funds and investment banks, however, will undoubtedly NOT “like those situations.”

Barron’s Business Dictionary on corporate espionage: 

Act of spying. An example is spying on the activities of another company by improperly gathering information about the competing company’s new products or practices. Usually the spy is paid a fee for the information obtained.

The danger of corporate espionage, according to The SANS Institute: 

Corporate espionage is a threat to any business whose livelihood depends on information. The information sought after could be client lists, supplier agreements, personnel records, research documents, prototype plans for a new product or service. Any of this information could be of great financial benefit to a scrupulous individual or competitor, while having a devastating financial effect on a company. Just about any information gathered from a company could be used to commit scams, credit card fraud, blackmail, extortion or just plain malice against the company or the people who work there.

In Web-based social networking, six figure Fortune 500 execs seek the discretion and confidentiality that LinkedIn uniquely offers, Reid Hoffman has indicated to me. The “LinkedIn Research Network” appears to thwart such desired privacy, however.

The “LinkedIn Research Network” also appears to contradict the spirit of LinkedIn’s Privacy Policy which asserts “We will never sell, rent, or otherwise provide your personally identifiable information to any third parties for marketing purposes.” How then will LinkedIn market its “Research Network” company-specific “expertise”?

What’s more, LinkedIn’s “primary research service” risks impacting non-disclosure and confidentiality agreements and insider trading restrictions.

Linkedin claims a “simple philosophy”: relationships matter. YES, but the way relationships are monetized matters as well.    

MORE: AP On LinkedIn: Social Networking Gold Mine at $5 per User? and Reid Hoffman: LinkedIn About Face (book) and Beacon Privacy Solution: STOP USING FACEBOOK! and Multiply.com CEO to Facebook, MySpace: STOP Claiming to be Real-Life Social Networks, INTERVIEW

PLUS: Google Apps Meets Les Miserables: Enterprise IT Team DREAMS Big and Why Silicon Alley VCs Should Do Blogging Due Diligence, Too

CONTACT DONNA BOGATIN

Forrester’s cheerleading squad is now claiming a “groundswell” for social networking advertising in a recession. How so? Marketing on UGC sites is cheap, among other “reasons.” YES, users’ spaces are indeed a cheap ad venue, but for good reason, just ask Google!

Here at Insider Chatter, I have been chronicling the hard battle being waged by social networks to raise the financial stakes in attempting to acquire high-quality, high CPM brand dollars.   

Multiply.com launched almost four years ago to “effectively define the new field of social communications,” according to founder and CEO Peter Pezaris. NOT in the mass media eyes of the 60 Minutes show, however, which recently accorded Harvard drop-out Mark Zuckerberg social media stardom, with not a word about the leading social network MySpace, let alone Pezaris’ Multiply (SEE: Mark Zuckerberg Confirms: Facebook is NO Google Killer).

Pezaris is not deterred, hoever, convinced of the superiority of his own platform.

Last Fall, on the heels of Multiply’s $16 million Series B round, I spoke with newly named Multiply board member, David Scott Carlick, Managing Director of the Digital Media & Internet team of Vantage Point Venture Partners, Multiply investor, and Pezaris, about the site’s plans to “educate” high CPM paying brand advertisers about the value of reaching users in their personally created environments (SEE: Multiply.com Raises Consumer Media Stakes AND $16.6 million VC: INTERVIEW)

I touched base with Pezaris this year to learn about Multiply’s progress. For now, Multiply is focusing on continuing to improve the user experience and plans to launch a premium, subscription service, Pezaris told me.

The Multiply CEO also shared with me how he REALLY feels about the social networking landscape, “We’re still  the only site around that leverages real-life social networks to share personal media, despite what some of our competitors claim,” Pezaris claimed to me.

I asked Pezaris for clarification on his definition of what a “real-life social network” is and to identify which Multiply competitors are falsely claiming to be such social media platforms.

Pezaris explained to me why he believes Multiply is the real social thing, the only one: 

MySpace offers very crude privacy controls which are unsuitable for exchanging personal media in all but the most basic use case scenarios.  Your entire profile on MySpace is either set completely public so that anyone in the world can see it, or completely private, so only your direct contacts can see it.  You have one switch to throw, and it’s either ON or OFF.Contrast this with Multiply, where everything you add to the site has individual fine-grained privacy controls, making the content available extended circles of friends, and friends-of-friends, through trusted, bi-directionally confirmed relationships.

For the exhibitionists of the world, there is no shortage of sites that can deliver your content to a wider audience of strangers –MySpace, YouTube, Flickr to name a few. But none of these sites add  significant value for the “regular guys” like myself who want to share their personal lives with *more* of the people that I actually know in real life, and *fewer* of the people I don’t.

Facebook?  Although you have better privacy controls on Facebook than on MySpace, they are still crude. The world is still binary — either someone is your contact or not.  There is no way to share your media with selected  individuals without first making them a contact of yours. This artificial pressure to add contacts degrades the quality and accuracy of your personal “social graph” over time — anyone who has used  Facebook or LinkedIn has seen these effects.

Multiply, in contrast, allows you to meaningfully and appropriately communicate with tier-2  and tier-3 contacts based on a proprietary “Calculated Proximity Index” system which ranks users in the system in order of how close they are to you in your real-world social graph (this is similar to  how Google’s PageRank works, only applied to social networks).  This recognition that friends-of-friends are important to you for the  exchange of personal media is how we keep our representation of your real-world social circles more accurate.

Multiply’s messaging system is sometimes compared to Facebook’s newsfeed. Some people have referred to the Facebook system as drive-by social spamming, but whatever it is, it’s not suitable for meaningful communication around personal media. Multiply, has an Inbox that combines all of the media sharing and communication that happens within your personal network in one place. You can filter this message-board like application to show you only those items you are interested in, and you can go back in time as far back as you want (unlike Facebook) – want to see all the  videos that have been posted by contacts of yours? No problem. Want to see all the replies to posts you made that you haven’t read yet? Click click done.  Want to see everything that’s being discussed in your extended network of friends-of-friends, including notification where the ongoing real-time discussions are? That’s where Multiply adds *real* value.  And each one of these settings is but a couple of clicks away, and saveable in a personal/private RSS feed, unique to you. On Multiply, not only is there a page 2, we even keep track of when people see what you want them to see.

Pezaris’ bottom MySpace and Facebook line:

Mark Zuckerberg and Robert Scoble ARE meant for each other!

Why does Facebook make young men swoon? I analyzed way back when (September 2007). To start the New Year, on the heels of the Scobleizer’s unauthorized intrusion into Facebook property, I pointed out “Robert Scoble’s Facebook heaven turns to hell,” Beware Extreme Evangelism, underscoring the on again-off again, here today, gone tomorrow, Scoble whale of a love-hate relationship with Facebook.

First, Scoble declared an unabashed, but insufficiently researched, love for Mark Zuckerberg’s Facebook, imploring the world to join HIS Facebook world, deemed by the Scobleizer to be the future of the world. Lo and behold, though, Scoble tired of his newfound Facebook love faster than a New York minute.

Scoble to Mark Cuban: “I’ve just given up on managing this stuff. Which is just as well cause now I’m getting more work done.”

Scoble’s Zuckerberg ennui then quickly turned to Facebook unrest, with a helping nudge from Plaxo, a company with ambitions to profit from its own idea of the “next-generation social network.”

Rather than soliciting all to share in his once Facebook love, Scoble’s Facebook New Year cry turned to one of passionate public indignation, deploring Zuckerberg’s unlitateral corporate power to “erase” a Scobleizer trail for a few moments from publicly accessible servers owned by Facebook.

What does it take to “erase” Scoble’s supposed fury over Zuckerberg’s modus operandi?  A personal invitation by the “shy” Zuckerberg to Davos breakfast together with Pakistani President, Pervez Musharraf.

Scoble’s commenters have been commenting on his chameleon Facebook flip-flopping and inconsistent editorializing:

CALI LEWIS (re: Scoble’s claims of Facebook “erasing”): Robert, you embrace and endorse third party services all the time. You’re blog is stored on Wordpress.com rather than using the amazing Wordpress software on your own hosted site. If you don’t host it, IMO, you don’t own it. You’re giving a lot of content to companies that may or may not have your best interest in mind.

Facebook sucks. Your endorsement of it almost got me interested, but ultimately, I can’t except a social network owning my stuff when it’s just as easy to get a domain name, get hosting and keep control. When I speak to kids in college. I tell them to register a domain and buy hosting and work to own their stuff. You should do the same thing. If you do, you’ll never get banned.

DON (re: Scoble’s endorsement of “shy” Mark Zuckerberg): The funny part is that you didn’t discuss your “wrongful” termination, nor the other issues your readers discussed, like the inability to get reinstated, nor the inability to commit “facebook suicide” and remove your content when you wish. That is why your article seems fawning and shallow to me.

Scoble says he did discuss such “other issues.” The net of Scoble’s discussion, though? Facebook PR speak:

“But he didn’t yet have answers as to just what Facebook will allow in the future,” Scoble demeured.

EXACTLY! Zuckerberg and Scoble are better off after their mutual win-win Davos turn, but citizen Facebook users are still in the same old Zuckerberg “no answers yet” boat. Beware Scoble’s Facebook advice, however, as he is now, post-Davos Zuckerberg tete a tete, firmly and supposedly for ever more in the Facebook camp:

This post sounds fawning, I know. But Zuckerberg demonstrated to me that he is, indeed, the real deal and that the hype he’s gotten over the past year has largely been deserved. He definitely won me over. Imagine what’ll he get done when he gets over his shyness.

WHO IS HYPING WHOM NOW? What “real deal” was demonstrated to Scoble by Zuckerberg over a PR breakfast aimed at “winning over” the Scobleizer? Facebook PR mission accomplished. Scoble reposted, seemingly verbatim, the official Zuckerberg PR lines, which did not contain any substantively new, concrete information. Outside of the Facebook VIP treatment he was accorded, there is no “real” reason apparent for Scoble’s latest dramatic editorial turn.

Moreover, there is NO need to imagine what Zuckerberg has in store for his users, as I have been underscoring since Scoble’s new found “shy” Facebook buddy unveiled F8 to the world. FOR EXAMPLE:

Why Zynga, NOT Scrabulous, Has a Lucky Facebook Charm and
Scrabulous At Risk? Zynga $10 million VC Game: Facebook Roulette and
2008 Social Media Warning: Beware Google AND Facebook and
YES! Facebook IS Scarier Than Google! and
Facebook is ‘Sorry’? Savvy Users Will Forget, NOT Forgive, Mark Zuckerberg and
Beacon Privacy Solution: STOP USING FACEBOOK! and
Dear Facebook, Beacon Tracking STILL Evil: Will Zuckerberg Partners Repent? and
Facebook STILL a Danger to Children: Zuckerberg, Attorney General Cuomo in PR Push and
Mark Zuckerberg: Use Facebook at Your Own Risk! and
With Facebook Platform as a Developer Friend, Who Needs Enemies? and
Startups: Why Facebook Platform is a Wolf in Sheep’s Clothing 

PLUS: Craigslist PR: Same OLD Media?

CONTACT DONNA BOGATIN

The Scrabulous Facebook games are heating up.

Last week, I broke the news that Zynga is at Facebook risk too. SEE my January 16, 2008 story: Scrabulous At Risk? Zynga $10 million VC Game: Facebook Roulette

Is Fred Wilson being too casual with Union Square Ventures’ money I asked? After all, the USV backed Zynga’s all-in bet on Facebook could blow up in smoke! Just ask Scrabulous, I underscored.

Now, six days later, Erick Schonfeld, Michael TechCrunch Arrington’s lieutenant, also wonders “Is Zynga next”? Wonder how he started to wonder that???

While now jumping on the Zynga at risk boat, though, Schonfeld misses the Zynga boat. TechCrunch rattles off some of the high-powered Zynga investors, but neglects to  make the crucial connection as I did last Wednesday: Crossover shareholder dreams!

Zynga believes it is NOT Scrabulous, claiming to have immunized itself from game infringement claims by scrambling its game names. What’s more, though, the high-powered Zynga investors are also Facebook investors: founder Mark Pincus himself, Peter Thiel, Reid Hoffman…

AND, didn’t we learn from the Associated Press yesterday that anything Angel Reid Hoffman touches turns to gold!!! Zynga and $10 million VC team undoubtedly believe they have powerful, incestuous secret Facebook weapons at their disposal, their own lucky Facebook charms.

As Mark Zuckerberg reminded Lesley Stahl, he has plenty of competent lawyers at his $15 billion disposal.

Schonfeld really gets it wrong though when he gives startup “advice” to would be future F8 game developers, hailing that “social networks have been a boon for casual gaming online,” so game on, with a license.

SORRY, Erick, a licensed game only mitigates one of the two double-whammy Facebook risks that a “cool app” such as Scrabulous engenders, as I underscored last Wednesday.

Web 2.0 VC standard bearers are throwing $10 million Zynga Facebook caution to the wind and heeding the “Internet court jester”’s advice to “Throw out your development, go use Facebook.” WHY, though? Because “It doesn’t matter if you are “better,” what matters is that you are “standard,” Esther Dyson gushed about Zuckerberg’s F8 upon its unveiling to the world.

BUT, is piggybacking on someone else’s property REALLY a bankable business model, I asked last week. WELL, who even needs a solid business model after all, at the time of a Web 2.0 investment, as we are repeatedly reminded by blogger VCs.

The Scrabulous team is piggybacking on the businesses of TWO other businesses: Scrabble and Facebook. ANY and ALL F8 third-party games play at the fickle mercy of Mark Zuckerberg, a young man fond of having his high-priced legal tgam whip up some high-powered terms of service:

We do our absolute best to keep Facebook Platform up and bug-free, but you use it at your own risk.

You must get signoff from us before releasing any formal press releases.

We reserve the right to charge a fee for using Facebook Platform and/or any individual features thereof at any time in our sole discretion.

Facebook may be independently creating Applications, content and other products or services that may be similar to your Facebook Platform Applications.

SEE: AP On LinkedIn: Social Networking Gold Mine at $5 per User?

MORE ON ZUCKERBERG’S STAR 60 MINUTES TURN: Mark Zuckerberg Confirms: Facebook is NO Google Killer

ALSO: Facebook Davos PR Blitz: Beware Scoble Hype, Users Still at BIG Risk

CONTACT DONNA BOGATIN

Associated Press staff reporter Michael Liedtke declares unequivocally, and headlines, that Reid Hoffman has “the golden touch.” Lest a reader NOT get the AP’s message, Liedtke’s Hoffman puff piece underscores in its subhead: “LinkedIn founder’s road to riches paved with golden connections.”

Nowhere in the AP story does Liedtke provide any quantifiable confirmation that Reid Hoffman has indeed achieved “riches,” though. Liedtke asserts under the AP banner that Hoffman has “raked in one Internet jackpot after another,” but offers NO numerical illustration of a single Hoffman Internet jackpot. On the contrary, the size of Hoffman’s Internet returns are NOT deemed to be oversized:

“Three of his startup investments have been sold since 2005 for more than $1.1 billion combined, although Hoffman got only a sliver of that.”

Liedtke asserts one Hoffman “windfall,” but does not offfer any hard returns data to back up the characterization:

“A college friendship led Hoffman to PayPal and his first windfall when eBay Inc. bought the online payment service for $1.5 billion in 2002. Since then, he has become even wealthier by investing in other Internet startups he discovered through friends and former colleagues.”

How can the AP’s Liedtke be so certain of Hoffman’s wealth? It is unlikely that he is privy to Hoffman’s private financial records regarding the entrepreneur’s private angel investments in privately held startup companies. If Liedtke is basing his conclusions about Hoffman’s wealth on third party information, he ought to cite his sources, as the AP’s “Values and Principles” demand.

What’s more, the hard data that Liedtke does include about Hoffman’s signature Internet venture–LinkedIn–does NOT support a social networking gold mine hypothesis. While the AP story perpetuates the yet to be open-market tested multi billion dollar “valuation” of Facebook, a Hoffman passive investment, and cites Hoffman on aspiring towards a noteworthy IPO for his active LinkedIn investment, the actual operating worth of LinkedIn is not questioned in the AP piece.

Hoffman on his five year old LinkedIn, of which he is the founder and largest shareholder:

“I know we are going to be much more valuable in a year or two. We have had (buyout) conversations with all the usual suspects, but I think an IPO is by far and away the most likely outcome.”

Apparently his “conversations” with suitors are NOT yielding Internet gold for LinkedIn’s Hoffman!

What about an IPO? What about LinkedIn’s $5 per user monetization record! According to the disparate LinkedIn performance metrics in the AP piece, LinkedIn has a base of 18 million user profiles and 2008 estimated revenues of $75 million to $100 million. Is $5 per user really the stuff that golden IPO dreams are made of, though?

The AP story discusses Hoffman’s LinkedIn Facebook “copycat” moves, a story I broke last month. SEE: Reid Hoffman: LinkedIn About Face (book)

LinkedIn is NOT a social/business networking slam dunk. How many of the 18 million users are active? What does the typical user actually get out of ”being on LinkedIn”? Target LinkedIn “customers” want to know. SEE: Deal Maker on LinkedIn: ‘What Do I Do With It?’

Power users themselves are having second thoughts about LinkedIn. SEE: Does LinkedIn Have a Connections Fraud Problem?

“Everybody in Silicon Valley is no more than two degrees away from being connected to Reid” says Hoffman friend and co-investor Peter Thiel.

REALLY? Hoffman seems many more degrees away from connecting with his own typical LinkedIn users: He disclaims attempts at connecting with him via his own LinkedIn profile! The Reid Hoffman LinkedIn “Contact Settings” warns:

“Unfortunately, I’m extremely busy…Good Luck!’

Good luck indeed, to Hoffman’s LinkedIn! 

PLUS: MySpace, Facebook Rule: Does Multiply.com Want To ‘Sell Out’? and Why Zynga, NOT Scrabulous, Has a Lucky Facebook Charm

ALSO: Salesconx Will Monetize Your Rolodex: LinkedIn Beware? INTERVIEW and Scrabulous At Risk? Zynga $10 million VC Game: Facebook Roulette and Facebook Davos PR Blitz: Beware Scoble Hype, Users Still at BIG Risk

CONTACT DONNA BOGATIN

If the MySpace rasion d’etre is to promote the unfettered creation of user-generated content, wouldn’t advertisers be missing out on the real MySpace experience if they advertise against “non” MySpace content. Moreover, do MySpace friends even visit the “non” MySpace protected areas in MySpace?, I asked John Trimble, SVP Branded Sales, FOX Interactive Media, in the Fall of 2006. Trimble made a “protected area” brand sales pitch at an IAB Summit, asserting that MySpace is where the “sizzle” is and putting the “best” MySpace face forward, a sanitized one.

Fifteen months later, as MySpace plows ahead with its safe, “non” MySpace “mainstream,” content agenda, The New York Times now also wonders if News corp.’s crossover dreams are compatible with the desires of Tom Anderson’s 221,416,999 friends: 

The original content may draw advertisers who are wary of placing a marketing message next to a messy profile page, but it is unclear whether the users who make MySpace the most-viewed Web site in America will want to watch TV episodes and chat with friends on the same site.

The MySpace nemesis, Facebook, believes it has accomplished an integrated social network brand advertising coup, by using Facebook users, often unbeknownst to the users themselves, as smiling product spokespeople in high-quality brand ads on users’ “friends’” Facebook profiles.

What about Multiply.com, a site launched almost four years ago, which “effectively defined the new field of social communications,” according to founder and CEO Peter Pezaris?

Multiply.com obtained a $16.6 million Series B round of venture capital financing last fall and I chatted with Pezaris and David Scott Carlick, the Vantage Point Venture Partners Managing Director which joined the Multipy board as part of the firm’s investment.

Pezaris and company continue to put forth a strong value proposition for users, but what about for high quality brand advertisers that are essential for the success of Multiply’s traditional media monetization model? 

Carlick told me in September he looks to Multiply–and all the social neworking players–to further educate brand advertisers about the under utilized power of reaching consumers in new, peer-to-peer environments where the users create all the content. Multiply sported Google AdSense, but Carlick derided it as “backfill” which does not enhance user experience. Both Carlick and Pezaris indicated to me they envisage a Multiply monetized by high quality brand advertisers seeking to directly engage with real people as they interact with friends and family in their own personal online spaces.

MySpace and Facebook are apparently succeeding in educating brands about the real power of real people.  

Where does Multiply stand four months later on its drive for higher CPM, brand advertising? Pezaris’ own Multiply profile page sports low CPM style banner ads for the likes of ringtones and domain name sales AND “backfill” Google AdSense.

Pezaris is now touting “numerous changes to Multiply with a focus on site optimization, such as an Ajax based interface for browsing therough photos within an album.”

Pezaris is particularly proud of his focus on the Multiply user experience, come what may. The Multiply CEO told me:

One side effect of this change is that we are knowingly deflating our page view numbers and ratings and rankings. Unlike other social networking and media sites that are primarily focused on numbers for the sake of a quick sell out, we are in this for the long haul and user experience continues to be our number one product development priority!

Which social networking sites are looking for a “quick sell out”? MySpace is long sold and Facebook is not for sale, we hear time and time again. BUT, what about Multiply.com, really?

What is the real end game time table for Pezaris and Multiply investors? How/where/when does the real money kick-in for the Multiply.com business model? Multiply does not have the levels of traffic or brand recognition that MySpace and Facebook enjoy.

How long will investors continue to fund Multiply.com? Will Multiply soon be looking for a “quick” way out?

ALSO: Multiply.com Raises Consumer Media Stakes AND $16.6 million VC: INTERVIEW and Lending Club $108 billion Market Opp ex Facebook: Goodbye Banks! EXCLUSIVE INTERVIEW

PLUS: Scrabulous At Risk? Zynga $10 million VC Game: Facebook Roulette and AP On LinkedIn: Social Networking Gold Mine at $5 per User? and Why Zynga, NOT Scrabulous, Has a Lucky Facebook Charm and Facebook Davos PR Blitz: Beware Scoble Hype, Users Still at BIG Risk

CONTACT DONNA BOGATIN