Inside Facebook

As the Facebook Platform matures in its second year, big upcoming changes like the profile redesign and new policy initiatives have altered the Facebook Platform landscape significantly. Inside Facebook asked Salil Deshpande, General Partner at Bay Partners (which launched its AppFactory application developer fund and incubation program 1 year ago), to share his thoughts on the current state and future of the Facebook Platform ecosystem.

Which of your portfolio companies are significantly invested in the Facebook Platform? How are they doing?

We’ve made a handful of investments. Several are in stealth. Buddy Media, which started out as an investment in a virtual currency (AceBucks) for Facebook, has evolved into an app & ad network. They have significant revenue — can’t talk about how much, but it’s many millions of dollars. So certainly they are monetizing.  We have multiple others that are monetizing and are profitable on an operating basis. Some are not yet.

Some of our Facebook investments have abandoned Facebook and chosen a destination site approach. Some of our internet investments have gone to Facebook for customer acquisition, to bring users back to their destination sites. And one of them has reimplemented their destination site experience as a completely on-Facebook experience.

For a handful of post-traction applications that we liked, rather than invest in them directly, we referred them (with permission) to Buddy Media, and they bought them.

Most of our smaller investments have received reasonable acquisition offers along the way, not from Facebook, but from other players in the space, such as media companies, application rollups, studios, or ad networks.

What is your view on the state and future of the Facebook Platform ecosystem?

One of the things we said on the day we announced our program (in the comments of a TechCrunch thread) was that if Facebook wants their social network to be a platform, Facebook needs to behave like a platform company. This is more easily said than done. It took platform companies such as Microsoft, Apple, and Sun Microsystems years to get this right.

Whether a certain service should be provided as part of the platform, or whether it should be left to application developers, is *guaranteed* to be an area of tension.  And it was an area of tension for all of the platform companies mentioned above.

Other common mistakes that wanna-be platform companies make include not treating your developers right (by not allocating enough resources for API development, stability, evolution, backwards-compatibility, documentation, support etc.)

There’s been ample blogging on Facebook’s behavior (e.g. here), but it hasn’t always been succinctly characterized as I am doing here - that if Facebook wants to be a platform, it needs to behave as a platform company.

In the particular case of Slide and Top Friends, in Facebook’s defense, it could be argued that Top Friends was not a “deep” application in any case, and keeping track of which of your Facebook friends are your “top”
friends should have been a “feature” of the Friends facility in Facebook in the first place. I’m not taking sides, but it would be a valid argument. And the same argument could apply to a lot of narrow feature-like apps.

So perhaps the lesson here is that (a) developers should work on deeper apps rather than thin or silly ones that are close to being features of the platform, and (b) Facebook should get the virality features right such that the deep meaningful apps (and not the silly stupid ones) find it easier to propagate themselves.

We are still positive on Facebook as a platform, but we are observing their behavior as a platform company carefully.

While Facebook simplified the News Feed interface a few months ago by removing the “thumbs up/thumbs down” ratings system, in-line News Feed preferences are now back in the Facebook redesign.

While before users gave feedback on a story, now users can give feedback on a story type or a particular friend: for example, “show me more feed stories about my friend John,” or “show me less photo stories.”

Facebook reportedly removed the first iteration of preferences from the News Feed because the factors did not have a significant impact on user satisfaction when compared to other elements of the News Feed algorithm. We’ll see how long this iteration lasts.

A day after Scrabulous developers Rajat and Jayant Agarwalla took the game offline in the US and Canada, the team of Indian brothers has relaunched the game with a new name and board design: Wordscraper. Wordscraper uses the same UI as the old Scrabulous and is played essentially the same way Scrabble is played, but with different “bonus tiles” and board dimensions.

Meanwhile, the official version of Facebook Scrabble, developed by EA under license from Hasbro, has experienced continued growth in the first day since Scrabble’s disappearance.

> Read more at Inside Social Games

It’s been nearly two years since Facebook’s News Feed launched. Tonight, Facebook is turning on the first major change to the News Feed user experience: News Feed filters.

News Feed filters are tabs at the top of the News Feed that allow you to view stories of only one type. This is a great way to consume feed stories more efficiently.

Seen only briefly once before during Mark Zuckerberg’s f8 keynote presentation, the new feed filters are now live on the Facebook redesign beta site at www.new.facebook.com. Here’s what they look like:

Currently, the following Feed filters are available:

• Top Stories (what the News Feed has always shown)
• Status Updates
• Photos
• Posted Items

Each tab filters your friends’ stories as you would expect. Absent from the list of filters is the “All Stories” tab that Zuckerberg demo’d at f8 - he described that view as “a log of everything” your friends have done.

Also absent from the list of filters are Facebook Platform applications (collectively or individually). While some applications publish low quality stories that most friends would just assume never see, many applications actually publish interesting stories that their friends want to monitor. Many developers want to see more application discovery in the News Feed, and News Feed filters could be a great way for Facebook to give apps more air-time.

This morning, Vindu Goel at the NYT reported that Scrabulous, the popular Facebook game and Scrabble clone, had been shut down. Just last week, Hasbro, owner of Scrabble IP in North America, filed a DMCA claim against the makers of the game.

However, it appears that the take-down was not Facebook’s doing. Instead, it was a voluntary move by the Agarwalla Brothers (see Inside Facebook interview here) while they sort out their legal matters in North America. Scrabulous remains accessible elsewhere in the world. They write,

Scrabulous is disabled for US and Canadian users until further notice. If you would like to stay informed about developments in this matter, please click here.

Facebook itself has chosen to stay out of the matter, and not get in the middle of the DMCA issues at hand between Hasbro and the Agarwallas. While Facebook is imposing a clearer policy on developers these days based on the design and functionality of their applications, it’s choosing to not impose itself as the arbiter of IP claims on application developers, but rather to remain a neutral intermediary instead.

Facebook has been growing by leaps and bounds during the first half of 2008. As of June, Facebook became the largest social network by reach at 132 million uniques, a 35% jump from the end of 2007. (See more overall data on social networking growth in 2008.)

So where are the new users coming from? Inside Facebook has been gathering per-country data periodically from Facebook’s advertising tools over the last year (note: this data is self-reported by Facebook users). By comparing data from 6 months ago to today, some interesting trends emerge:

• Facebook’s staggering Latin American growth: 2.3 million new users in Chile during the last six months; 2 million new users in Colombia; 1 million new users in Venezuela; 0.4 million new users in Argentina
• Facebook’s continued European growth: 2.7 million new users in the UK in the last six months; 1.1 million new users in France; 0.4 million new users in Spain
• Saturation in some major developed markets: Canada (30% of population on Facebook); Norway (25% of population on Facebook); Austrailia (18% of population on Facebook)

Here’s a look at the top 25 fastest growing user populations by country, and Facebook’s largest international user populations overall. The results may surprise you:

Top 25 Fastest Growing Countries on Facebook in 2008 (%)

Top 25 Fastest Growing Countries on Facebook in 2008 (Absolute)

Top 25 Countries on Facebook as of 29 July 2008 (Outside US)

If you’re interested in obtaining the source data for all 90 countries that Facebook publishes data on, please email mail AT insidefacebook DOT com and introduce yourself. Enjoy!

Additional Inside Facebook Resources:

• Tutorial: Translating Your Applications Using Facebook’s Crowd-sourced Translation Service

Although it’s taken a lot longer than expected, and is still highly restricted, MySpace today announced the launch of applications invitations (what it’s calling ACC or Application Communications Channel).

Here’s how MySpace invites work:

• App invites can only be sent to 1 friend at a time (though MySpace says this is only for now)
• There can be “no incentives” to users for sending app invites
• App invites aree viewed in a new “Notifications” folder in the MySpace Mail Center
• The invite have a 1-click flow to add the app, but the link text cannot be customized

MySpace’s VP of Product Kyle Brinkman writes,

We expect App Invites to be a really important feature for getting the word out about your apps. While we are still supporting messages, comments, and bulletins, App Invites give you a much more direct way to let your users invite their friends to get your app: the ux is cleaner, the user “workflow” simpler and faster, and Invites are easier to find and recognize. Additionally, App Invites get their own indicator item on the User Home Page!

Developers can check out documentation on MySpace invites here.

While there have been many Facebook Developer Garages lately, OpenSocial meetups have been more few and far between. Social Media is fixing that by hosting its first OpenSocial developers meetup, dubbed OpenThread, at its officers August 15 in San Francisco.

OpenThread will be a mix of discussion followed by socializing. The discussion will feature OpenSocial representatives and developers speaking about the platform. The event is free, but space is limited so sign-up ahead of time to reserve your spot.

Here are the details:

• Where: SocialMedia: Pier 38, San Francisco, CA
• When: August 15th, 5pm - 9pm
• Who: MySpace and other OpenSocial developers, including Linus Liang (CLZ Concepts), David King (Lil Green Patch), and Kenneth Walton (Klicknation)

Facebook announced this morning that it has hired Mike Schroepfer, former VP of Engineering at Mozilla where he led the development of the Firefox web browser, as a new Director of Engineering with responsibility for leading front-end product and platform engineering.

Prior to Mozilla, Schroepfer was the CTO of Sun’s data center automation division (”N1″). There, Mike was made a Distinguished Engineer, one of Sun’s highest technical accolades. He joined Sun as part of its acquisition of CenterRun.

Schroepfer was likely courted to Facebook by Blake Ross and Joe Hewitt, the Mozilla co-founders who joined Facebook when it acquired their company, Parakey, last summer. Facebook continues to grow out its engineering team, and is investing heavily in building a top notch infrastructure - it went so far as to take out a $100 million loan to buy thousands more servers earlier this year.

Commenting on the hire, Facebook CEO Mark Zuckerberg said, “Mike has a lot of experience building great products and engineering teams. At Mozilla, he built Firefox 3 and manages the product development process — a particularly impressive position given the global, collaborative and open process in which Mozilla operates and develops its products. Facebook has similar values and Mike will be a great addition to our engineering team.”

Facebook application acquisitions are a lot like domain name sales: out of every 10 that happen in any given week, only 1 gets publicly announced. While only a few Facebook application sales have been publicly reported (Inside Facebook has broken the news on the following sales: Pieces of Flair and Speed Racing to RockYou for a rumored seven figures each, Free Gifts, Esgut, and Nicknames to SGN, Favorite Peeps to Slide, and Extended Info to Sidestep), there’s actually a fairly active market for applications going on behind the scenes.

The biggest challenge developers face in selling their applications is the supply glut: there are simply many more applications (over 25,000 are listed in the directory) than interested buyers. So, how can developers sell off their applications? Here are 8 tips for beating the market and successfully completing a sale:

1. Build a Sustainable Viral Loop/Game Mechanic. Because they’re so rare, developers who invent apps which naturally sustain their growth through compelling viral loops or game mechanics are very valuable in the eyes of acquirers or investors. If your app achieves large scale daily active use, you should be able to get a good valuation in current market conditions. For example, Pieces of Flair and Speed Racing were recently acquired by RockYou, and the developers of the game Friends For Sale successfully raised $4 million for a chunk of their company.

2. Prove a Revenue Model, No Matter How Small. If your application makes money, even a couple dollars a day, you’ve got a valuable asset on your hands. First, consider ways of templating your application so you can make more money. If you’re ready to sell it off, the Developers Forum or eBay are good places to list. Acquirers should pay a reasonable multiple of your annualized revenue - somewhere between 5-7x.

3. Clone Existing Applications. If you’re short on ideas, look at what other people are doing that’s working and do your best to emulate them. Chances are that where there is one buyer, there are others. Requests for clone apps are common in the Developers Forum (see examples here or here). Try to pick one that’s not yet a commodity.

4. Build To Order. Speaking of the Developers Forum, many buyers will post requests for applications they’re looking to acquire. Watch requests closely, and jump on opportunities when they come up. If you’re quick, you might be able to build a nice little arbitrage business.

5. Build Using Standard Technologies. Before an interested buyer will sign on the dotted line, they’re going to want to do due diligence and take a look at your code. If your app is written in PASCAL, you’re going to have a hard time convincing the buyer that they’re going to be able to use what you’ve created. Stick to PHP and MySQL and you’ll be fine.

6. Be a Rockstar Developer. If you’re running 200,000 DAU off a memcached 486 in your closet, chances are top Facebook app companies want to talk to you. Let me know if you need an introduction

7. Get a Large Number of Users. Let’s face it: at the end of the day, it’s a lot more expensive to get 1 million users to add your app today than it was a year ago. If your app has achieved wide distribution, there are buyers lurking in the Developers Forum waiting to talk to you (see example here).

8. Offer Maintenance for a Limited Time. For potential buyers of your app, one of the scariest scenarios they can think of is your server crashing the day after they write the check. Promise to stay on board and ensure a smooth transition for your app to its new home for 30, 60, or 90 days, and you’ll make your potential buyers much more comfortable spilling the ink.

BONUS TIP: Don’t Listen to “Agents.” If somebody approaches you and offers to help you sell your app for a “portion of the sale price,” run for the hills. ESPECIALLY if this is the first time you’re doing a sale. There are a lot of sharks out there that talk a smooth game but ultimately don’t have your best interests in mind. They probably don’t know any more than you do, and at worst, they may try to totally screw you over. Unfortunately, it happens more often than you think.