Inside Facebook

If the Platform Rush of ’07 was about creating APIs for third party developers to build applications on social networks, the Platform Rush of ’08 is about extending those platforms to the rest of the open web.

Before May of 2007, it was impossible for third parties to build anything on Facebook. At the same time, MySpace was kicking third parties off the site left and right, disabling off-site clicks in Flash widgets, and generally wanting to own the entire experience itself.

My, how things have changed quickly. On Thursday, MySpace announced a Data Availability initiative that will allow users to share profile data and friend lists via their REST API with OAuth authentication. In a curiously timed Friday afternoon release, Facebook announced its Facebook Connect initiative which will allow third party websites to access Facebook users’ profile data and friend lists (consistent with users’ Facebook privacy settings) via new Facebook Platform APIs and authentication. And on Monday, Google is rumored to be announcing an OpenSocial initiative called Friend Connect, which will do much of the same thing (though perhaps with more restrictions).

Social networks have had so much success “platformizing” themselves over the last year that they are now rushing to embed themselves into a new “social” layer that sits beneath the rest of the Internet. The hope is that where a person’s profile is, there his trust will be also. By enabling users to share their profile data, friend lists, and privacy settings with applications all over the web – not just with applications on Facebook.com or MySpace.com – social networks will enable new classes of web applications that take advantage of the deeper social context never before available to almost everyone else. And thereby, in the process, make themselves an increasingly important part of the Internet’s infrastructure.

Why? Infrastructure plays usually have different business models than $.10 CPMs.

Facebook developer Jesse Farmer has slurped the Developer Forums for the last 3 months and found some powerful trends: since January, posts per day are down 51%, and and the number of contributing developers is down 27%. In addition, Farmer has tracked daily active user levels for apps launched during that same time period, and the numbers correlate: the later apps have been launched, the lower daily activity levels have been. Farmer concludes that it’s getting harder to have success on the Facebook Platform, and developers are turning their interests elsewhere.

While it’s clear from Farmer’s numbers that developer activity peaked in January, the most important signals of the Facebook Platform economy are ultimately not forum posts but rather financials. As the initial wave of interest in the platform settles out and those working on cracking the monetization nut march on, the true test of the viability of the Facebook Platform is whether a substantial number of entrepreneurs will be able to establish successful businesses that can weather ongoing changes in platform conditions.

The good news for developers is that as social networks compete for developer attention, they will have to prove that the economic health of their developer community is strong. That game is still very early.

It’s been many weeks in the making, but we at Inside Facebook have some exciting news to share today - we are launching a new, experimental second blog called Inside Social Games! Inside Social Games is going to be entirely devoted to tracking the convergence of games and social network platforms.

So what are social games anyway - and why Inside Social Games now? Just as I was surprised two years ago by the way my “non-geeky” friends were using Facebook, I’m finding myself repeatedly being surprised by the way those same people are playing new kinds of “social games” inside Facebook (and MySpace, Bebo, Friendster, Hi5, and Orkut) now. Games that, despite their apparent simplicity or complexity, are being adopted in large numbers by people outside traditional console, PC, and online gaming demographics. Games on social networks are bringing together family and friends like games never before have - and we think that’s pretty darn cool.

Like Inside Facebook two years ago, I’m starting Inside Social Games as an experiment. An experiment into what “social gaming” really means and how social games may or may not be changing the way large numbers of people play and communicate. What the results will be, I’m not yet sure, but I’m excited to see what conversations emerge over the coming weeks and months, especially between the game design and SNAP communities.

I’m proud to announce that I’ve been able to land Chris Holt (also of PC Gamer) to review current and new releases. Chris would love to receive tips on new games, so feel free to contact him at submit AT insidesocialgames DOT com to let him know what you’re up to.

We’re looking forward to tracking not only the games but also the people and companies behind them that are leading the charge into this new and exciting space. We believe some interesting new companies will be created as the worlds of gaming and social networks collide. It should be a fun ride. Please drop us a line any time!

As Facebook application developers experiment with different ad networks for the Facebook Platform (like Social Media, Lookery, Buddy Media, Cubics, fbExchange, RockYou, Offerpal Media, Google AdSense, Zohark, AdChap, AdBlade, VideoEgg, and more), everyone’s asking the same question:

What is everybody else making, and how can I make more?

Every ad network is different (and so is every app). Some can fill different types of creative, and others can fill different user segments. For example, VideoEgg has a unique high performing unit, but can only fill a small amount of inventory, while Lookery has an open offer promising guaranteed rates for all European traffic.

While different ad networks make different claims regarding what kind of price and performance they’ll be able to deliver, the best solution for all developers is to give several of them a try and stick with the ones that work best for you. More sophisticated publishers have a person whose sole job is to turn the knobs up and down on different ad networks, depending on how they’re performing - while you may not be able to optimize your inventory down to the zip code and hour, you should be able to easily improve your eCPMs by experimenting with different ad networks.

As a start, here’s info from current Facebook app developers on what they’re making on a CPM/eCPM basis from ad networks serving the Facebook Platform:

• tspree15 is making $0.60 CPM with Social Media
• cbovis is making $1.50 CPM with VideoEgg, but they can’t cover all his inventory (the rest runs on RockYou)
• sweetsteve is making $0.27 CPM with Cubics, down from $0.43 earlier this month
• ejono is seeing a $0.40 CPM with Cubics
• cory is making a $4.78 eCPM with Social Media (???)
• mzeitler is making a $0.50 CPM each with AdSense, FB Exchange, Social Media, and RockYou (and by combining 2 units on a page is making $1.00 CPM)
• saintseiya is making $0.125 CPM with Lookery ($0.25 with 2 ads above the fold)
• markdoub is seeing $0.10 CPM with Cubics, down from $0.43
• ersingencturk is seeing $0.04 CPM with AdSense

Want to help your fellow developers out? Share your tips and lessons learned below.

What CPMs are you seeing?

Serious Business, Inc., makers of popular Facebook social game Friends For Sale, has raised a $4 million Series A venture round from Lightspeed Venture Partners at an undisclosed “healthy double-digit” valuation. The investment will be announced by Lightspeed’s Jeremy Liew, who is becoming a board member, and Siqi Chen, co-founder of Serious Business, at this morning’s Games 2.0 panel at Web 2.0 Expo.

Along with SGN (through parent company Freewebs) and Zynga, Serious Business becomes the third Facebook game developer to raise a solid round of venture financing. As social gaming has proven its potential to keep users engaged on social networks more than almost all other applications, investors have taken notice. Friends For Sale alone has over 600,000 daily active users on Facebook.

Inside Facebook had the opportunity to speak with Siqi Chen, fellow co-founder Alex Le, and Jeremy Liew about the investment and vision for the company.

Inside Facebook: Siqi, what is your vision for Serious Business?

Siqi Chen: We’re building social games. While most games on social networks use the platforms merely for user acquisition, we’re more interested in creating original game play experiences native to the social networking environment.

If you know what you’re doing, building games that get distribution on social networks is not a problem. If you’re good at designing games, engagement is not a problem. And if you have a good team, monetization is not a problem.

Inside Facebook: Who’s on your team, and what were you doing before?

Siqi Chen: Right now, we’re just a small team of engineers. Friends For Sale was just built by me and Alex. Ryan Ferrier is our COO, and he’s handling all of our operations and biz dev. We’re just focused on scaling and building a world class engineering team.

Alex Le: We’ve hired 3 people in the last week - all Ruby developers. We’re building one of the, if not the, largest Ruby clusters in the world. We’re already profitable, and the investment is going to help us get a head start.

Siqi Chen: Before Friends For Sale, Alex and I built the Facebook game Mafia. It’s a very social game and perfect for the social networking world, but it wasn’t very viral, so we switched and built Friends For Sale instead.

Inside Facebook: So do you think of Serious Business as a developer or a publisher?

Alex Le: We don’t plan to help other games get distribution. The idea of being a publisher is a little outdated in this world.

Inside Facebook: Jeremy, you’ve been speaking about your interest in social games for quite a while now. What originally got you interested in Siqi and Alex?

Jeremy Liew: Siqi and Alex have created a native game mechanic for social networks. They have done a fantastic job of transferring the social context into the game mechanic.  It’s not just about inviting 10 friends and getting X thousands of dollars, though that’s a component. They’ve also created viral mechanisms into the game play itself.

By taking advantage of people’s existing relationships - for example, wanting to own your girlfriend or your wife, being peeved that some random dude buys that person away from you, buying nicknames for people, and baking that into the core app - I think it’s interesting.

I think there’s plenty more where that came from with this team. They’re well positioned to take advantage of the digital goods economy. And the growth speaks for itself.

Facebook hosted its first Developer Roundtable event in Palo Alto today, bringing dozens of Facebook developers together for a more personal discussion surrounding Facebook’s upcoming redesign of the profile page and new application reputation system. The developers ranged from the largest on Facebook to those just beginning. I got permission from the Facebook Platform team to share my notes from today’s meeting with you here.

Representing Facebook were several members of the Platform team, on both the product marketing and engineering sides. First, Tom Whitnah presented on the application reputation system. Then, Sasha Rush discussed the upcoming profile page redesign. Finally, Sandra Liu Huang and Ruchi Sanghvi took general Q&A. Several other Platform team members met with developers during small group breakout sessions.

Here’s what was discussed - the emphasis is mine:

Application Reputation System - Tom Whitnah, Facebook Software Engineer

• We’re trying to establish a reputation system for applications that is a proxy for user affinity and user experience. Are users happy with the profile box, the notification, the request you just sent, or was it misleading?
• When calculating application viral channel allocation limits, recent data is weighted more. This means if you change behavior, your limits can improve. However, your historical performance still has an impact.
• We’re still trying to make the system more mature. For instance, if you accept a request to view a message but actually get something else, that’s a bad experience and we need to capture that.
• We want to expose more data without giving away more tools to game the system. But we do plan on giving more granular (i.e. per-notification and per-invitation) statistics.

 Profile Redesign - Sasha Rush, Facebook Software Engineer

• The main goals of the redesign are to help users communicate and share information more efficiently, generate more meaningful activity, and increase user trust. We want the Feed to be really good, and users to be really happy - the Feed is not an ad channel.
• The 4 major components of the update are: 1) The Wall-Feed combination - we’re merging the most important communication channels on the profile page into one, 2) The About tab - think of it as an extension to the static information you currently have on your profile, 3) The introduction of Tabs in general - there will be 3 by default (Wall, About, and Photos), and apps can add more, and 4) The left column - the same left column will appear on both the Wall and About tabs, and apps can add boxes here.
• With the new profile, it will become increasingly important for applications to create meaningful feed stories. The main purpose of the feed is changing from what you’ve done to content you’ve created.
• Users will be able to create content in-line on their and others’ feed stories. There will be a publishing flow. Any app that emulates our wall will fit in here.
• Users will approve “big” feed items you create using Feed Forms. “Small” feed items can still be automatically published.
• Tabs are really interesting - they allow you to put everything that users have done in your app right in their profile page. We will be following a limited canvas page model - we will pull FBML directly from your server, but some interactions will not be allowed. For instance, we won’t be allowing auto-play Flash on the profile.
• Users may be able to add some app content to the right side of the About tab. We will give applications templates to work within here. The templates will contain images and can link back to the canvas page, but think about the content as a generalized comma separated list.

Q&A - Sandra Liu Huang, Facebook Platform Product Marketing, Ruchi Sanghvi, Facebook Platform Product Manager, and Sasha Rush

• On the launch date - we are targeting late spring at this point. The sandbox will be open to developers well in advance.
• On adding tabs - the exact flow is still under internal debate, but it will be a very explicit choice - not automatic or on by default.
• On About tab limitations - can’t auto-play Flash, won’t give the viewer’s ID due to privacy, willing to take suggestions for how to handle it differently if the viewer already has the app.
• On application about page reviews - they’re too spammy to take into account for the application reputation system right now - it wasn’t built by the Platform team so it has some issues (snickers from colleagues).
• On the left column - the same left column will appear on the Wall and About tabs. There will be a height restriction, but we’re still deciding what it will be. There will be a limit to the number of application boxes users can have on their profile page, but that is also still up in the air. We were just talking this morning about whether to allow users to choose their own maximum number of boxes or not.
• On the migration user experience - we’re not sure exactly how we’re going to allow users to choose which profile boxes to keep above the “extended profile” fold, and which to hide.

Overall, the mood of developers was appreciative but concerned. Very appreciative for the Facebook Platform team inviting developers in to have a conversation and solicit feedback and input regarding upcoming changes, but nevertheless concerned about the potential overall impact of the profile box redesign.

It was clear in today’s meeting that many details regarding the profile changes are still not finalized and will potentially be impacted by feedback from the developer community. Developers are encouraged to send feedback to the Facebook Platform team at developer-feedback AT facebook DOT com.

While Facebook is a multi-faceted service that could grow in any number of directions, Facebook’s recent cues indicate that first and foremost on its mind right now is establishing itself as a communication platform. Facebook doesn’t want to become a content distribution system or an entertainment console as much as it wants to wants to become the dominant way you communicate with your friends.

This is not a short term goal that will instantly reap financial benefits. As some have recently pointed out, communication tools like email and IM have historically been difficult to monetize. Rather, it’s a long term plan that has the potential to significantly change how the world shares information.

I think Facebook and other social networks can create the most enterprise value by continuing to create new communication channels that provide better user experiences than what’s existed before - channels that are only possible because they own a large chunk of the social graph. On Facebook, this has been happening in a number of ways:

1. News Feed

In my opinion, the News Feed is Facebook’s greatest innovation to date. It has organized and filtered a large class of one-to-many messages like never before. Many types of messages that today are broadcast via Mini Feed and consumed via News Feed have historically (less efficiently) been broadcast and consumed via email: status updates, content sharing (links, photos), service referrals (applications, Pages, Beacon). However, Facebook’s ability to organize and filter these messages according to your personal preferences has made consuming them in great volume much more palpable and valuable than any email client or feed reader ever did. I really continue to believe that the News Feed has the potential to deliver greater value to the consumer than any broadcast channel ever built.

2. Messaging

Many people in tech circles can’t talk about Facebook’s messaging system without complaining about it, but even though it “sucks,” Facebook Messaging is replacing (or has already replaced) email with friends for many users (especially those under 21). Even though it lacks a feature set comparable to most email clients, the context for large classes of one-to-one messages is simply more important. As Facebook enhances the context around messaging, and builds more utility into the service, I think a greater portion of conversations currently conducted over email will move to Facebook.

3. Wall

Much of the same could be said for Wall. Its semi-public context has made it a more valuable channel than email for both the senders and receivers of messages that appear one-to-one but are often really one-to-many. (Facebook has tried to make the Wall into a media sharing platform as well, but apparently without much success.)

4. Chat

With the exception of Google Talk, it’s been years since most people have experienced an improvement in synchronous communication. While Facebook hasn’t announced any chat products yet, I wouldn’t be surprised if it did soon. Chat is just a better experience around your social network - most of the time, people want to talk with their friends. Just as Google Talk has probably significantly increased the number of people using IM, so could Facebook…downloading a client and exchanging odd handles is an experience that’s just too complicated for some people.

In the end, if Facebook wants to own the most valuable channels for communication with your friends, this could have significant implications for the Platform. It’s clear in announcements Facebook has made regarding upcoming changes to the profile page that Facebook is expanding the role and concept of the Mini Feed and Wall, while simultaneously dealing a blow to applications that may depend on significant profile page real estate to provide valuable communication experiences to users. If Facebook does indeed build a chat application, that could obviously hurt applications building chat around the Facebook experience. At the same time, however, Facebook has been promising to reward applications that enable valuable and meaningful interactions with greater visibility within the new Wall and News Feed.

While I hope Facebook can co-exist with and reward developers of communication-oriented Platform applications, I think Facebook is smart to want to own the most important channels used to communicate with your friends. While it may take a while to figure out how to monetize these new communication channels most effectively, people will always stay most engaged with services that provide the most value, and core communication tools are some of the services that can be most enhanced by ownership of the social graph.

(This article is part of the series The race to build the Facebook Gaming platform)

Company: Social Gaming Network
Location: Palo Alto, CA
Employees: ~8
Funding: spinning out of Freewebs, which raised money last year; rumored investment round could be announced soon
Founders: Shervin Pishevar, TJ Murphy and Haroon Mokhtarzada (2007)
More Developer Info: SGN Developer Page 

Inside Facebook: How did SGN get started inside Freewebs?

Shervin Pishevar: TJ Murphy created Warbook last summer. By August, it had reached 15 million page views/day, and we saw that there was a huge opportunity for a pure play social games network.  Since then, we’ve focused on original ideas and games that are specifically built for Facebook and other social networks. We think there is a lot of true innovation happening in the social games space.

IF: So what kind of games are you betting will work best on social platforms?

SP: We’re focusing most on asynchronous/turn-based game play. Facebook is not yet ready for synchronous games - it will get there, but we’re just at the beginning now. Game play will get more advanced over time, and graphics will get more interesting over the years. To us, Facebook is a gaming console.

IF: What’s your vision for the SGN platform?

SP: We want to revolutionize the market for game developers, and provide them with the services and platform they need to scale. Initially we’ve launched a game bar, and the initial results are looking very positive. We’re not charging for or limiting the number of installs we’re giving away for the next year. The Gaming Hub is our way to build the gaming graph - the game feed will give valuable information about what games your friends like (and it gives us valuable demographic information). And soon, we will allow developers to build their own levels and add-ons for Warbook.

We want to be a platform company - we know we can’t build or buy all the games in the world, we want to build the network. We want to stay close to the product, so we will continue to build our own games a well.

IF: What do you think sets SGN apart?

SP: We’re a small company of very passionate game developers. We build original games, and think that’s very attractive. We have a smaller and faster game bar, and we don’t have any contracts - try us, and if we’re performing, stay with us. We’re also selling for games in our network. For example, we’ve done direct deals with Doritos, Audi, and Herbel Essence, and we’re sharing revenues with developers.

IF: We’ve also heard that you’ve acquired a couple developers.

SP: Zach Allia, the creator of Free Gifts, just joined us (Free Gifts will remain a separate entity). Simeon Dorsey, the creator of Jetman, just joined us on product as well. He was the first one to do shared leaderboards and character unlocking. There’s a lot of people like Simeon around the world (he’s from a small town in Wisconsin), and we want to change the model for them.

IF: Finally, we heard you’re moving out to Palo Alto. Any other announcements coming soon?

SP: Yes, we’re spinning out of Freewebs and moving to Palo Alto on March 10. We may have some other announcements later, but nothing to announce right now.

(This article is part of the series The race to build the Facebook Gaming platform)

Company: Zynga Game Network
Location: San Francisco, CA
Employees: ~35
Funding: $10 million - Avalon Ventures (Rich Levandov), Foundry Ventures (Brad Feld), Union Square Ventures (Fred Wilson), Reid Hoffman (CEO of LinkedIn), Peter Thiel (Managing Partner of Clarium Capital), Pilot Group (Bob Pittman and Andy Russell)
Founders: Marc Pincus, Michael Luxton, Andrew Trader, and Eric Schiermeyer (2007)
More Developer Info: Zynga Developer Page

Inside Facebook: Mark, how did Zynga get started?

Mark Pincus: We originally just set out to build one game (Texas Hold ‘Em). It was getting a lot of traffic, and we were having trouble finding people who could sell it for us, so we decided to build our own CPA/CPI (cost per action/install) ad network and offer it to other people. We found that offering in-game incentives to influence our users’ behavior led to good results, and we found that we needed more product.

By the end of fall, we saw an amazing opportunity to build the largest distribution channel for games on the internet.  Not only distribution, but also monetization. As game developers ourselves, we wanted an integrated channel. It’s becoming much harder to grow your user base these days, so you need another way to grow your base.

IF: What kind of games are you betting will work best on social platforms?

We see three options: 1) Creating short-lived, viral games (like Oregon Trail), 2) creating a repeat model and growing slowly (like Attack), 3) taking mature properties and making them more viral (like Scramble).

IF: What is your vision for the Zynga platform?

MP: We offer developers two things: 1) a cool social utility (the social bar) that makes you look bigger, and 2) more reach with terrific context. Our social bar shows what other games your friends are playing on the network, and we guarantee at minimum 1 click for every click that developers give to the network. And we’ve found that it’s not a zero-sum game - people like discovering what games their friends are playing, and overall clicks are up. Soon, we’ll be adding an API allowing developers to publish detailed game feeds. That will deliver even more traffic.

IF: Are developers concerned that you’re a publisher too?

MP: Building games has been a great way for us to learn new game models. We’re opening up our network, and think it’s a good deal for developers.  Take EA - they’re a publisher/distributor, and that has allowed them to be one of the largest marketers as well. This actually isn’t new for the game industry - Pogo and Real produce and distribute games. They’re competing networks on one level and producing games for each other on another level.

IF: We’ve heard about some acquisitions you’ve made as well.

MP: We have acquired a couple of small game developers, primarily as ways to bring people on board. For example, Triumph: we saw brilliance in the way Ritesh Khanna was designing games. We acquired a couple from the UK who made Superheroes and have grown it organically. We also brought in CLZ, who were viral experts - we gained a lot of distribution, but no return use really - we just couldn’t buy the reach from RockYou or Slide.

IF: What do you think sets Zynga apart?

MP: Any good developer should try both options and go with what works better. Our numbers speak for themselves. We have 1 million daily active users that we grew organically, and now 1.4 million with the addition of CLZ. We’ve built a model where behaviorally our users are very interested in trying new stuff, and we’re able to remind users about your game through our network. And our dev app is very clean.

IM: Finally, do you have any advice for new media marketers evaluating social games?

MP: I believe that from a marketing perspective, social platforms are the third generation of the Internet. First we had the web, then we had SEO, now we have social platforms. Each time, we’ve reached a new realm of customer acquisition costs - and a new realm of category killers. My advice is to be early, use and test the medium for others do. Our most aggressive advertisers are small advertisers - they understand the power of being first…it will cost a lot more a year from now.

“Games are the killer Facebook apps.”

“Facebook is the next gaming console.”

These are the words being spoken by venture capitalists and entrepreneurs in Silicon Valley these days.

A few weeks ago, Inside Facebook profiled the top game developers on Facebook. While there are many more developers of Facebook games that are growing in popularity, two companies - Zynga Game Network (Zynga) and Social Gaming Network (SGN) - are taking a different approach. Instead of just building games, they’re building “game networks” in an attempt to become the largest game distribution channel in the social networking world.

Inside Facebook, and other social networks, that means that Zynga and SGN are building their own “platforms within a platform” that enable developers access to 1) enhanced services like game news feeds and analytics, and 2) promotional opportunities to reach the network’s large gaming audiences, like the game bar.

Zynga and SGN have both launched their own developer tools and APIs and are working feverishly to build out their networks with the best games and developer services. Already, both have acquired smaller game developers and signed up many more. At the same time, Zynga and SGN continue to develop their own games in order to best understand the needs of the developer community - playing the combined role of publisher, partner, and distributor.

We sat down with Mark Pincus, CEO of Zynga, and Shervin Pishevar, CEO of SGN, to get a deeper look at what each company is up to.

• Interview with Mark Pincus, CEO of Zynga Game Network
• Interview with Shervin Pishevar, CEO of Social Gaming Network