What Facebook Is Really Buying with Instagram (Beyond Photos)…

By: Jed Williams, 12 Apr 2012


Facebook’s acquisition of mobile photo app Instagram earlier this week wasn’t especially surprising (though the $1 billion price tag may have been). Mobile is a fertile, untapped channel for the social giant, but a growing risk factor the longer the opportunity remains unrealized. And with $5-$10 billion in cash reserves expected after its IPO next month, Facebook could quickly become an aggressive and powerful buyer in much the same way Google has.

BIA/Kelsey foresaw this specific acquisition months ago when Facebook first filed its S-1, as explicated in our February IPO report:

“Facebook will soon have enough cash to buy its way into most opportunities. The question is where will it spend? As it invites deeper sharing through the expansion of Open Graph, Facebook will consider buying sharing apps that fit the vision of its platform. Likely genres are photo (Instagram, Path, Pinterest) and video (Klip, Tout).”

Instagram has exploded onto the tech scene as a leading photo-taking-and-sharing platform, raising $57 million over the past 14 months to create delightful visual experiences through unique filters for its mobile users. It’s a mobile-first and mobile-only product, though one without any material revenue.

What’s more compelling than what Facebook is acquiring, though, is what it is actually buying (figuratively) – and here, those have two very different meanings.

Facebook’s richest asset, even if not fully monetized, is its expansive and engaged user base – 845 million strong. That base is swiftly migrating to mobile. In the cases of younger audiences and users in emerging nations, the Facebook desktop experience may be bypassed entirely. More than 50 percent (50.3 to be precise) of that base now accesses the network on mobile devices. Yet Facebook makes not a drop from the channel.

Recently, it began experimenting with Sponsored Stories inside mobile news feeds, a first step toward monetization. Facebook’s effort to re-define the mobile advertising experience through social context is still in its embryonic phase, however. The network needs time to fertilize the strategy, scale it across its massive base, and translate it into a revenue game-changer. It can’t do that if the rapidly-growing mobile base departs for other pastures (or platforms), or even spends less time engaging within its walls. Photo tagging and sharing has been the greatest stimulant to growing Facebook’s engagement and time on site metrics. These behaviors and metrics must be safeguarded, and even extended, on mobile. Instagram posed a threat.

Yes, Facebook’s buying a direct competitor in the all-important photo domain. And with Instragram comes a talented team that can bolster its mobile platform, even as Instagram remains a standalone app. But what Facebook is really buying for $1 billion is…TIME. Time to figure out mobile in a multi-billion dollar way before the user base, and the opportunity, erode.

Now, what will it buy next? Mark Zuckerberg claims that he “won’t do many more of these [types of acquisitions], if any at all.” However, considering Facebook’s outsized goals, which we believe include creating a ubiquitous payments system and building both advertising and content distribution networks, then the spree may just be starting.

We’ve long thought that with Facebook’s deep hooks into third party sites through Connect, which enriches its already-robust social data trove, the network is well positioned to launch an ad network across both desktop and mobile. As such, it could have its eye on a demand-side platform, sell-side platform, or ad exchange that improves its ad targeting and delivery capabilities (akin to Google’s acquisitions of DoubleClick, AdMob and AdMeld).

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Swipely: Loyalty Program Links Purchase Behavior to Promotions

By: Peter Krasilovsky, 11 Apr 2012

One of the big bets in 2012 is that merchants will transition from one-time deals to loyalty efforts that keep bringing customers back. Swipely is one of the more ambitious efforts in a loosely defined space that also includes players such as Cartera Commerce, Edo Interactive, LevelUp, CardSpring and Kostizi.

Swipely’s ambition is to provide a “turnkey loyalty program” to merchants, who pay the company based on generated sales. It is targeting “Big SMBs” with revenues between $500k to $3.5 million who accept credit cards — beyond Square.

The Providence-based company has raised $8.5 million from investors that include Index Ventures, FirstRound Capital, Graylock Partners, Lowercase Capital and angel investor Ron Conway. Launched in May 2010 in Providence, the site has now launched in Boston and San Francisco, with launches imminent in New York and Washington D.C.

It has outside sales in those markets, and some inside sales as well. Over 350 merchants have signed up.

Consumers sign up to the service once, providing a credit card of their choice to link to merchant deals. They can sign up via word of mouth, or come in via merchants’ email lists or social media. After consumers opt into a merchant deal (typically $10 off and/or merchant loyalty points), they receive followup email promotions based on their purchasing history and purchasing frequency, and guided by day-parts, day of week and other factors.

We talked with CEO Angus Davis, a co-founder of TellMe and also a Netscape vet. Swipely has the advantage of not requiring any change in consumer behavior, he says, noting that 93 percent of people can just deploy their pre-existing credit cards. “There are no coupons, no vouchers. And merchants don’t need to upgrade in the store.”

The service has been especially built “with the goal of calculating the information behind transactions and tying the Web to payment networks,” adds Davis. “It is about more than moving money.”

And apparently, it is about more than social media, which was the site’s initial focus. “Social media is not as compelling as saving money and (receiving) rewards,” says Davis. He suggests that in the context of working with merchants, social is primarily useful to “review purchases in a seamless way.”

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Telmetrics Reports Mobile and SMBs Are Driving Pay-Per-Call Growth

By: Elise Simmons, 10 Apr 2012


While pay per call usage is growing across all local search media channels,  Telmetrics reports today that mobile advertisers and SMB programs are the real drivers of a more than three-fold growth in adoption. The call measurement solutions provider is tracking 348 percent more pay per call ads in Q1 2012 than in Q1 2011.

Mobile experienced the highest gains as the number of measured mobile pay per call ads jumped more than 30 times since last year. Earlier in 2012, Telmetrics predicted that mobile marketing would drive pay per call. We expect mobile advertising to continue to disrupt traditional advertising investments for all media.

Call durations are also increasing, as advertising providers continue to optimize their local search programs to generate more relevant leads and monetize those leads through pay per call. On average, call durations have increased 20 percent since Q1 2011. In the pay per call industry, call duration remains a stable indicator of lead quality. Here’s a breakdown of the call duration by segment:

Mobile-3.5 mins/call

Yellow Pages-2.8 mins/call

Internet Yellow Pages-2.7 mins/call

Paid search-2.2 mins/call

Telmetrics tracks the lead generation quality of local search advertising and pay per call programs for publishers and agencies that serve SMBs. BIA/Kelsey will release an in-depth advisory on the pay per call industry within the next few weeks.

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Webcast this Thursday: Taking Your Business Mobile

By: Mike Boland, 10 Apr 2012

This Thursday, we’ll be participating in a webcast about getting up and running on mobile. This includes both Apps and mobile web presence, as well as launching ad campaigns for greater exposure/traffic.

I’ll present some of our forecast data and supporting points for mobile optimization, while Google and AppStack will present some of their own data and tools for building mobile optimized sites and apps.

The webcast will begin at 10am PDT (1pm EST) and you can register for free here. Hope to see you there.

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For Better or Worse, AT&T Deal Sets Bar for Yellow Pages

By: Charles Laughlin, 9 Apr 2012


AT&T has sold a 53 percent stake in its Yellow Pages business to the private equity firm Cerberus Capital for $950 million. This works out to a valuation of $1.8 billion. The deal involves both the Advertising Solutions and AT&T Interactive operations.

Significantly, AT&T has elected to hang onto 47 percent of the business. AT&T may be reasoning that a private equity firm would more willing and able to make the substantial changes to the business needed to unlock value. If it works, AT&T will see the value of its sizable remaining stake grow, perhaps substantially.

AT&T Advertising Solutions produced EBITDA of $1.03 billion in 2011 (2011 revenues were $3.3 billion), so the deal works out to about a 1.75X EBITDA multiple. In historic terms, that is awfully, awfully low, but it reflects how investors view the directories business today. The intensely negative view of the legacy Yellow Pages business (somewhat overdone in our view, given the residual value in the printed product), will lead some companies to consider shutting down their print operations just so they can be valued as an online rather than a legacy business. This is why so many companies are telling investors that within a few years, print will not account for more than a quarter of revenue.

We think this deal is a steal for Cerberus. As we wrote when reports of this deal first surfaced, had AT&T sold its directory business at peak multiples back in 2007, the business could easily have fetched more than $10 billion. It’s been a tough road for directories since then, but the AT&T business is better than this fire sale price suggests. The company has a huge sales force, strong brands, deep executive talent and it still produces $1 billion in EBITDA. If Cerberus is wise, it will retain AT&T’s top talent, people like Mike Fordyce, David Krantz and many others.

The AT&T deal is likely to have repercussions around the global industry, as investors in other directory companies will be dismayed that the largest company in the industry has just sold at such a low multiple. This could compel debtholders at other publishers (Dex One, SuperMedia) to find a deal while they think they still can. Another perhaps more likely scenario is that investors will sit tight and see how this deal plays out. As long as the businesses are generating cash and servicing their debt, why do a fire sale? Longer term,we think consolidation is inevitable among the major U.S. directory companies.

The only reliable prediction is that Cerberus will not stand pat but will take some dramatic action with AT&T, either to strip out costs or re-position the business (probably some combination of both). Will it combine the Ad Solutions and Interactive businesses? What about a roll up scenario? Will it rationalize its print footprint, culling under-performing markets? These and other options are likely on the table.

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Applying Big Data to Home and Trade (and other Verticals?)

By: Peter Krasilovsky, 9 Apr 2012

Home and Trade lead sites often take a simple, category-by-category directory approach, but visual contractor rankings might make more sense, argues Jiyan Wei, Co-founder of BuildZoom. Wei says that his team canvassed Home and Trade sites such as Angie’s List, ServiceMagic, RedBeacon, Thumbtack and others and noted that many don’t do much more than provide basic listing data and reviews.

Even if the Home and Trade sites are generating good traffic, they aren’t always producing a lot of leads, says Wei. That’s because consumers don’t have much to go on. Enter BuildZoom, which has developed a comprehensive ranking system. The company’s Big Data approach is based on assorted information from state licensing boards and Better Business Bureaus; crowd sourcing via social media sites; insurance and bonding status; and self-provided information.

BuildZoom’s “Pro Ranking” provides consumers with information on up to 25 candidates per job. For $100 a month, the site will provide consultative services to drive up ranking and search results, including access to copywriters, photo placement etc. “The core asset is consumer value,” notes Wei. Sites that charge commissions to contractors could have an element of built-in bias. The site also earns revenue from sponsored placement.

The site, founded in August 2010, is angel-funded and currently receives over 250,000 unique visitors a month. More than 8,000 businesses have registered, and it has 120 paying customers. A handful of sales people have been assigned in Arizona and southern California, but they are not limited geographically.

“We already have lots of East Coast contractors related to remodeling projects in New Jersey, Georgia and North Carolina,” says Wei. He adds that Home and Trade is seen as just the first of many possible verticals for the company.

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Google’s GoMo: Get Your Free Mobile Website

By: Mike Boland, 6 Apr 2012

Google’s GoMo effort just took a step forward by offering free do-it-yourself mobile website creation. GoMo, for those unfamiliar, is the search giant’s program to evangelize the benefits of websites that are optimized for mobile devices.

The goal is cleaner sites, “thumb friendliness” and prominent calls to action conducive to mobility (think click-to-call, or directions). Google’s goal is also to expand the friendliness and use of the mobile Web — where search is central — compared with native apps.

The new offer is care of our friends at DudaMobile, who were already partners in the GoMo program. In addition to the goal of getting things going on the mobile Web, this could drive ongoing Duda subscriptions, as the free period ends after a year.

The GoMo program essentially makes Duda’s “Premium” package free for that year, including creation and hosting ($108 value). Its tiers of service otherwise look like this (click to expand):

BIA/Kelsey Competetive Intelligence Lead Celine Matthiessen went as far as to create a free mobile version of her website. She claims it took about 15 minutes and she’s now set up with a nice looking mobile site.

This ease of use is one of Duda’s claims to fame. Content is pulled from a desktop site so it’s populated quickly and subsequent updates don’t have to be made in two places. And this is very much geared toward individuals and SMBs. Google writes

Please note that DudaMobile’s technology is best for converting simple sites. If your site uses a lot of Flash content, framesets or e-commerce, we suggest that you Go Mobile by talking to your agency or working with one of the developers here.

Here are some of the screen shots Celine sent me, which show the setup process, including picking a template, calls to action and check-out.

ScreenHunter_01 Apr. 05 22.25

ScreenHunter_03 Apr. 05 22.25

ScreenHunter_02 Apr. 05 22.25

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Project Glass: View of the Future, or Fashion Faux Pas?

By: Mike Boland, 5 Apr 2012

There’s been lots of talk over the past 24 hours about Google’s new “Project Glass,” and yes it’s pretty cool. For those unfamiliar, this is Google’s project to develop eyewear that overlays media and search information (think directions or local venue discovery).

This falls under augmented reality, as it overlays translucent layers of data on the world around you. Except instead of having to hold up a small smartphone screen, it’s a more seamless experience in that it’s built right into eyewear and happens “before your eyes.”

This brings up lots of interesting implications (not to mention some questions and doubts explored below), but the best way to understand is to watch Google’s video mockup:

The challenge, like erstwhile attempts at augmented reality, is availability of all that geocoded data. Augmented reality is only as good as the content that it can bring up — and that relies on a whole lot of data. The other potential barrier, likely more apparent, is fashion.

Google is entering unfamiliar territory with wearable technology, which of course overlaps with the fickle world of fashion. No matter how cool the use case is, it could fly or die based on initial success of how it looks or plays out on the streets of NYC (note the setting of the demo video).

But it could benefit from Moore’s law in being shrunk down over time to attach to users’ existing eyewear. In the meantime, aspects of what Google is showing is one answer to Local Corp.’s Peter Hutto’s good question at ILM East last week: “Where is augmented reality going?”

BIA/Kelsey’s Matt Booth joked that we’ll soon see YouTube clips showing users transfixed to their smartphone AR interfaces walking off piers or falling into fountains. That’s a longstanding joke around here, but it has some truth.

Along those lines, a clever interweb jokester made a video in response to Project Glass. Enjoy.

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