Investing in Facebook: Rick Marini of BranchOut

This week, Inside Facebook asks people who have built businesses on the Facebook platform why they believe in the company. These are the people that are truly invested in Facebook, whether or not they bought stock.

For Part 4 of our series, we spoke with Rick Marini, founder and CEO of professional networking service BranchOut. The Facebook app lets users organize their professional connections, see which friends have worked at companies their interested in and search for jobs. The company has raised more than $49 million in venture capital since it launched in 2010.

Seeing the potential of Facebook

Marini realized the potential of Facebook when the social network moved in on the turf of his own company. In 2009, Marini created, a social entertainment site that allowed users to express themselves by becoming a fan of everything they love in life. It soon became clear that Superfan couldn’t compete with Facebook’s own fan pages product. When Facebook changed “become a fan” to “Like” in 2010, the number of Facebook users joining fan pages quickly accelerated.

“I realized the power of the network,” Marini says. Superfan began to incorporate sharing features so that users could “fave” things on the site and then post that activity to Facebook.

Around the same time, Marini and his team began to think about how Facebook could be applied to a number of different of industries.

“We realized there were all these verticals that should be social, that should be done on Facebook,” he says.

Developing a business idea

Marini says the most obvious industries that would be transformed by Facebook were those that were inherently social, like dating, ticketing or travel. These are things that bring people together offline, so they should be done that way online, too.

After working at job search company Monster for three years, Marini and his team still had ideas about the jobs and networking space.

“We realized no one had owned the professional side of Facebook,” he says. This seemed to have greater potential than Superfan did.

Marini and his team pivoted and became BranchOut in June 2010. They launched the app a month later.

Confidence in Facebook

Marini believes in Facebook because of its scale, the frequency with which people return to it, and the strength of connections people have there with friends and family.

“Facebook has combined [these] three big things that I don’t think anyone’s ever done,” Marini says. “That’s incredibly powerful and they still have a lot of runway.”

Then there’s BranchOut’s own quick rise. The app, which runs on the Facebook canvas and the mobile web, has more than 10 million monthly active users, according to AppData. Last month when BranchOut raised $20 million in a series C round, the company announced it had more than 25 million total registered users. Much of the app’s recent viral growth comes from Facebook’s Open Graph publishing and single sign-on for mobile.

Future of Facebook

Marini sees Facebook’s future not just in advertising but as a platform for developers.

“They want companies like BranchOut to disrupt multibillion dollar businesses,” Marini says.

In order to do that, Marini says he’d like Facebook to invest more resources in the platform so there are more engineers focused on developer relations and fixing bugs sooner.

“We want Facebook to be responsive and move as quickly as we can,” he says.

Though, Marini notes that in other areas Facebook already moves extremely fast and continues to innovate. He sees the company making big strides in mobile this year.

“I think it’s going to go from good to great,” he says. “I think they have a lot of focus to really make an enhanced experience there.”

Marini says the IPO gives Facebook the financial flexibility to attract top talent and do more deals like the Instagram acquisition so that it can stay on top of trends. As far as monetization, he says Facebook seems to be paying the most attention to advertising, though they’re looking at ways to monetize the platform better. For example, Facebook has said it might reduce the 30 percent fee it takes from developers using Credits for payments.

“For companies like BranchOut, that 30 percent doesn’t make sense,” Marini says. “Facebook gets this.”

Overall, Marini believes Facebook will continue to operate with a long vision of the future, not for short-term gain.

“They’ve made it clear they’re not going to manage the company quarter by quarter,” he says. “Mark [Zuckerberg] wants to focus on product innovation. Sheryl [Sandberg] will continue to focus on the business side.”

Read Part 1 with Clara Shih of Hearsay Social
Read Part 2 with John Corpus of Milyoni
Read Part 3 with Hussein Fazal of AdParlor 

Facebook launches standalone camera app for iOS

Facebook today released Camera, a standalone iOS app that lets users take photos, add filters and share them on the social network. It also includes a photos-only feed.

The app, which sounds a lot like Instagram, was developed by Facebook alone since the Instagram acquisition has not yet closed. Camera is now available in the App Store, but there’s no word on a release for Android yet. A recent update to Facebook for Android included a shortcut to the camera within the main app, but it did not have all the features of the new iOS standalone app. [Update 5/24/12 11:57 a.m. PT - Previously this story said that Facebook for Android still included a camera shortcut. We have corrected it since a more recent version of the app removed the shortcut features.]

On first impression, the most useful aspect of Camera could be the bulk upload feature. The main Facebook for iPhone app does let users add photo albums or attach multiple photos to a single post, but most users are unaware that this is possible. The process is also pretty slow. The standalone Camera app seems to have sought to improve this.

The launch of a mobile photo-sharing application is a bit of a surprise considering Facebook’s recent $1-billion purchase of Instagram. Screenshots of a Facebook photo app leaked last summer, but when the app didn’t launch and the social network bought Instagram, we figured the company had moved on. Facebook says that it will continue to let Instagram operate under its own brand and allow sharing to networks like Twitter. If Camera takes off, Facebook could ultimately merge Instagram with the app.

This is third standalone app from Facebook. In addition to the main iOS app, Facebook offers Messenger and Page Manager. We can imagine the company continuing to develop standalone apps to provide additional functionality without bogging down the main app, while also gradually taking over users’ home screens on iOS and Android devices. For example, Facebook could develop an events app that makes it easier for users to organize spontaneous meet-ups and find out what their friends are doing. This could be separate or combined with a location-based app that helps users find their friends and new people around them, similar to Glancee, which Facebook acquired last month.

See screenshots of Camera below:

Facebook testing global/regional fan pages that share a single Like count

Facebook appears to be testing a way for pages to customize their presence for different regions while maintaining a unified total Like count across all pages.

It seems users who visit a page will be automatically directed to the version specific to their region, but they can access any regional or global page through a drop-down menu. Many pages have amassed large global fan bases, but any given post reaches a small subset of those people. Sharing region-specific content with the right audience can have a big impact on reach and engagement. This latest test allows each page to display the same total fan count, which could encourage brands and organizations to expand their regional efforts without worrying about the perception of having pages with a low number of Likes.

Earlier this year a study found that posts from local branches of a business generate reach five times the percentage of fans as a post from a corporate page. The study also found that local posts see engagement from eight times as many of the fans reached compared to corporate posts. NPR conducted an experiment that used Facebook’s geotargeting feature to post local stories to a smaller, more relevant subset of its fan base, and found that local stories outperformed global stories six-to-one in terms of engagement rate.

We do not yet have details on how regional pages might be created or managed through Facebook, but it seems that these pages can be completely customized with different cover photos, posts, about sections and apps. Although the total Likes will be the same across global and regional pages, each will have its own Talking About This count. We will share more information as it becomes available, but so far this test seems to be limited to Facebook’s own marketing pages, based on what we can tell from our PageData tracking service. See some examples below.

Hat tip to, which first wrote about the feature.

Lawsuits and regulatory investigations turn IPO into a black eye for Facebook, underwriters and Nasdaq

Facebook, its underwriters and the Nasdaq exchange continue to face scrutiny over the company’s $16 billion initial public offering, as a number of investors have filed lawsuits and regulators have called for investigations.

Facebook’s stock closed at $32 today, up more than three percent since yesterday but still down from its $38 IPO price. Here we’ll recap the two main issues causing this onslaught of controversy and discuss what has happened so far as a result.

First were technical issues with the Nasdaq, which many claim led to botched trades on Friday when Facebook went public. The exchange had said it would set aside $13 million to cover compensation costs, but Nasdaq OMX Group was then sued on Tuesday by an investor claiming the exchange was negligent in handling orders for Facebook shares. Nasdaq representatives now say that if they had fully realized the extent of the technical problems they faced, they would have delayed the IPO. Facebook is reportedly getting pitches from the New York Stock Exchange to switch its listing.

The other controversy involves underwriters Morgan Stanley, JPMorgan Chase, Goldman Sachs and others, as well as Facebook itself. Reports claim underwriters’ analysts reduced their earnings projections for the social network during the company’s roadshow, but did not make the change widely available to potential investors. According to Reuters, the banks are now forecasting 30.4 percent year-on-year 2012 revenue growth on average, instead of the 36.7 percent growth previously expected. In 2011, Facebook’s revenue grew 87.9 percent year-on-year to $3.71 billion. Another report says Facebook executives were involved in suggesting analysts revise their estimates.

As such, lawsuits have been filed in New York and California on behalf of investors who claim they had a legal right to know about the lower growth forecasts before the IPO. The underwriters, Facebook and its executives are listed as defendants in these suits.

According to Reuters, the U.S. House and Senate committees that oversee financial sector matters are planning to look into the allegations — as are the Securities and Exchange Commission, the Financial Industry Regulatory Authority, and the Massachusetts Commonwealth.

Morgan Stanley said in a statement Tuesday that it “followed the same procedures for the Facebook offering that it follows for all IPOs.” Facebook did not provide comment about the regulatory inquiries, but regarding the lawsuit, spokesperson Andrew Noyse said in a statement, “We believe the lawsuit is without merit and will defend ourselves vigorously.”

Facebook to sell premium ad placement through Ads API, Power Editor

Advertisers will be able to buy premium ad inventory — on the home page and within News Feed — through the Ads API and Power Editor tool rather than working directly with a Facebook ad representative, the social network tells us.

Although the functionality is not yet live, this could allow third-party ad companies like AdParlor, Buddy Media and TBG Digital to continue to serve high profile clients who want more prominent ad placement that wasn’t previously available through the API. It also means Facebook may be able to better scale its premium advertising product without having to greatly expand its own staff.

Many advertisers feel Facebook does not have enough employees taking the time to address their individual business needs. The competition among third-party providers may lead these companies to be more attentive and an increasingly ideal alternative to working with Facebook directly. According to the Preferred Marketing Developer directory, there are 44 companies with access to the Ads API. The Power Editor, a self-serve desktop tool with advanced functionality, is available to some advertisers who request it from a Facebook representative.

In February, Facebook announced new premium ad offerings, including mobile Sponsored Stories, Reach Generator and logout ads. At the time it was unclear how this would affect third-party ad services and software providers, who only had the ability to buy ads that ran within Facebook’s right-hand sidebar. We do not have details on whether all of these premium options will be available through the API or Power Editor, but Facebook tells us it is working on this with developers and agencies now.

[Update 5/23/12 4:16 p.m. - Facebook confirms to us that it will only give third parties access to premium homepage ads within the feed and right rail, not mobile inventory. Logout placement and Reach Generator services will also still need to be managed by a Facebook representative. Since these are newer offerings, the social network is likely looking to manage these ads more carefully.]

Example premium placements soon to be available through the Ads API and Power Editor:

Note that page-post ads such as the one below are only eligible to be shown in the News Feed of users who already Like the page running the ad or who have a friend that does. Ads in the sidebar can be shown to users who do not Like the advertiser’s page or have any other social connections to the brand. 

Facebook settles Sponsored Stories lawsuit without disclosing terms

Facebook today settled a proposed class action lawsuit that contested how the site uses names and images of users in its Sponsored Stories ad product.

The plaintiffs of Fraley et al v. Facebook, Inc. asserted that the social network’s new ad type turns users into spokespeople, and thus entitles them to compensation under California law. The company did not share terms of the settlement in court documents and representatives did not offer comment on the case. Had Facebook not settled, it might have risked what it sees as a major component of its future advertising business.

Sponsored Stories, introduced in January 2011, allow advertisers pay to promote a user’s actions — such as Liking a page, playing a game or sharing a link — to their friends. However, California’s Right of Publicity Statute prohibits the use of another person’s name, voice, signature, photograph or likeness for advertising without a person’s consent. According to Reuters, Facebook claimed it was immune under the law’s “newsworthiness” exemption because the plaintiffs are considered public figures to their friends and their actions on the platform are generally newsworthy.

Some advertisers have found Sponsored Stories to have lower costs and higher clickthrough rates than Facebook’s traditional ads. Earlier this year Sponsored Stories became part of Facebook’s initial steps to monetize mobile usage with these ads now eligible to be shown within mobile News Feed. The company is also testing options for advertisers to create Sponsored Stories that promote Open Graph activity, including actions, such as what users watch, read or listen to. We’ve also seen the social network increase the size and design of Sponsored Stories within the desktop feed recently.

Facebook IPO raises questions for regulators; SEC, FINRA likely to investigate

Regulators suggested today that they will review Facebook’s initial public offering following reports of the Nasdaq’s technical issues and possible violations by underwriters, according to Reuters and the Wall Street Journal.

Securities and Exchange Commission Chairman Mary Schapiro and Financial Industry Regulatory Authority Chairman Rick Ketchum separately told the press that their agencies would be looking into allegations and concerns surrounding the much-scrutinized IPO. [Update 5/22/12 2:27 p.m. - Massachusetts Secretary of Commonwealth William Galvin has issued a subpoena to Morgan Stanley over it discussions with investors on Facebook prior to the IPO.]

Sources tell Reuters that Morgan Stanley, JPMorgan Chase and Goldman Sachs revised their earnings projections for Facebook during the company’s roadshow but did not make the change widely available to potential investors. Business Insider’s Henry Blodget explained that the underwriter analysts reduced their estimates after Facebook had filed an amendment to its IPO filing, which included a note that user growth continued to outpace revenue growth in the second quarter of 2012. He wonders whether Facebook had any direct involvement in the analysts adjusting their projections. [Update 5/22/12 3:02 p.m. - Blodget now says he has sources confirming that a Facebook executive told analysts to lower their estimates.]

Although companies do not release their own financial forecasts before an IPO, they generally provide guidance to underwriters whose analysts determine an estimate. Any information a company offers leading up to an IPO is required to be made available to all potential investors, however, bankers often favor their institutional clients and share information with them before disseminating it to retail investors.

As for issues with the Nasdaq, the exchange experienced a number of technical issues on Friday that could result in $13 million in compensation for bad trades. A number of investors were unable to verify whether their orders went through for several hours.

These problems seem to have led some investors to be more wary of Facebook’s stock, which has fallen to $31 today after initially listing at $38 and going as high as $45 on Friday morning. Shares are down 8.9 percent since Monday and down 18 percent from the offering price.

Investing in Facebook: John Corpus of Milyoni

This week, Inside Facebook asks people who have built businesses on the Facebook platform why they believe in the company. These are the people that are truly invested in Facebook, whether or not they bought stock.

For Part 2 of our series, we spoke with Milyoni founder and CEO John Corpus. Milyoni is the Facebook commerce and social entertainment company best known for making films and live events available for streaming on the social network.

Seeing the potential of Facebook

Three years ago when Corpus was CIO of Mervyns department store, he saw the rapid growth of Facebook as an opportunity for commerce. At the time, the social network had about 150 million users. Although that is far less than the more than 900 million using the site now, it was a major milestone in 2009. Corpus says the growth was especially interesting when compared with trends showing that online display and search conversions were declining.

“The three rules of retail are location, location, location,” Corpus says. “Facebook was where people were spending more time.”

He says it was the amount of interaction and the speed of sharing happening on the site that stood out and led him to want to build a company on the platform.

Developing a business idea

When Corpus founded Milyoni (pronounced “million-eye”) in February 2009, the company was focused on helping businesses sell physical goods. Milyoni offered the “iFanStore,” an e-commerce platform for Facebook, Twitter and MySpace. It was one of the few e-commerce apps that let users stay within Facebook during an entire transaction and then share their activity with friends.

The company gained a lot of entertainment-focused clients, including HBO, the NBA, UFC and The Onion. These companies were selling things like t-shirts and DVDs through the app. But Corpus says that a conversation with Warner Bros., at the end of 2010, led to a whole new market: digital goods.

Milyoni and Warner Bros. were discussing how video was incorporated in the app when an executive asked whether a full feature could be shared on Facebook. The companies decided to try it, and in March 2011, they made “The Dark Knight” available for streaming on Facebook with users paying for the rental using Facebook’s platform currency, Credits. The success of that test and others led Milyoni to develop what it calls “Social Cinema” for movies and “Social Live” for things like concerts and sporting events. The company is now primarily focused on these areas rather than selling physical goods through Facebook.

Confidence in Facebook

Corpus says Milyoni could expand to other platforms in the future, but for now it’s focused on Facebook.

“This is not a fly-by-night type of business,” Corpus says, pointing to Facebook’s latest user numbers and engagement statistics, which includes 300 million photo uploads and 3.2 billion Likes per day. “From a foundational standpoint, they’re here to stay.”

Milyoni’s own success on the platform is further proof for Corpus, who says Facebook users have watched more than 700,000 minutes of Milyoni content in the past three months. The company now offers more than 150 titles from 16 studios available on Facebook, and it plans to bring 700 more titles and 30 more live events to the platform this year.

Facebook’s future

To capitalize on the social network’s growth in users and engagement, Facebook now has to focus on growing its revenue streams through advertising, mobile and commerce, Corpus says. Social games were a good start, but he says there is a lot more opportunity around social entertainment where studios and other content providers can connect directly with their consumers.

Facebook’s payments revenue was $186 million in the first quarter of 2012, up 98 percent compared to the first quarter of 2011 when Credits were not mandatory for social games transactions. However, most of that revenue is still from sales of virtual goods, not digital goods or experiences. Milyoni is one of the few companies helping to pioneer the use of Credits outside the realm of games. Corpus says the social network needs to do more to get users to understand Credits so that they are more comfortable using the currency and spending money within apps. He sites PayPal as an example of another company that took a few years before it was widely considered secure. Corpus says that making it easier for users to see and manage their Credits accounts could help Facebook in this area.

“They have to let people know it’s not just Monopoly money,” Corpus says. “They have to provide people with a level of confidence and security to make it a more trustworthy place.”

Read Part 1 of our series, which profiles Clara Shih of social marketing software company Hearsay Social.

Rob Zombie, Serve, Target, Ray-Ban, Samsung, more on this week’s top 20 growing Facebook pages

Facebook’s mobile application for feature phones topped our list of the fastest growing Facebook pages as measured by Likes this week. Musicians, Facebook, YouTube, a few movie pages and brands like Target and Ray-Ban rounded out the list.

Pages on our list this week grew from between 357,200 to 2.6 million Likes. We compile this list with our PageData tool, which tracks page growth across Facebook.

# Name Total Likes People Talking About Daily Growth Weekly Growth
1    Facebook for Every Phone 89,216,745 2,836,432 +372,633 +2,645,489
2    Rob Zombie 1,851,994 27,773 +466 +979,482
3    Andaz Apna Apna 837,833 3,604 +349 +600,012
4    LUX 595,756 906 +126 +590,282
5    Samsung Mobile USA 5,889,231 604,665 +69,475 +537,159
6    Adele 28,738,324 565,979 +66,984 +497,406
7    RealMsLaurenLondon 522,026 11,238 +32 +491,890
8    Titanic 23,922,569 566,844 +60,494 +452,417
9    Jeremy Lin 954,881 552,606 +34,979 +438,508
10    Rihanna 56,128,843 753,451 +58,302 +433,580
11    The Simpsons 50,674,946 841,397 +54,353 +419,958
12    Serve 503,633 374,353 +25,365 +419,867
13    Facebook 66,877,793 451,328 +59,510 +404,236
14    Eclipse 5,564,067 57,491 +4,434 +399,854
15    Ray-Ban 3,485,020 287,717 +59,974 +399,406
16    YouTube 57,826,245 445,547 +53,951 +389,501
17    Target 12,442,767 402,109 +55,638 +381,990
18    Slotomania – Slot Machines 4,387,218 605,582 +43,965 +367,094
19    FC Barcelona 31,181,615 802,392 +48,621 +358,974
20    Eminem 57,250,003 451,949 +47,901 +357,182

Facebook for Every Phone has been a leading page for a few weeks now since users of the app are prompted to Like the page when they download it. Musician Rob Zombie came in at No. 2 likely as the result of page consolidation. Other musicians, Rihanna and Eminem, make frequent appearances on our list. This week it could be due to Rihanna’s role in “Battleship” and Eminem’s latest single.

No. 3 on our list was Hindi movie “Andaz Apna Apna,” which also appears to have seen a spike in Likes because of page consolidation. “Titanic” continues to grow after the film was re-released in theaters in 3D.

Samsung Mobile USA took the No. 5 spot largely as the result of Facebook ad campaigns. The company has been using its page to promote products and a concert for customers in New York City. Target also continues to run Sponsored Stories that have kept the page on our list for a few weeks.
The prepaid account service Serve saw its page grow, likely because of a Farmville integration. Zynga today announced a partnership with American Express to launch a the Zynga Serve Rewards program that lets players earn Farm Cash when they use the FarmVille prepaid credit card.

Facebook stock falls to $34 on second day of trading; pundits quick to criticize

As many expected, Facebook’s stock fell below its offer price today, settling at $34.33 when the market closed.

Some pundits have rushed to call the social network’s initial public offering a flop, but it is important to distinguish between what a successful offering would be for Facebook versus what the media and some investors might have wanted to see. It is fairly common for stocks to fall below their offer price within the first six months after an IPO. The lower stock price does indicate that the market finds Facebook overvalued in the near term, though its future potential could be much higher.

As Fortune senior editor Dan Primack and Trinity Ventures partner Daniel Scholnick have written, Facebook’s was a highly successful IPO in that the social network likely maximized how much money it raised in the offering. Without a first day “pop,” Facebook can feel confident that $38 was the right IPO price. Had the stock gone way up, the company and investors who sold shares in the offering would have missed an opportunity to make more. Some aggressive investors might be disappointed that the stock didn’t pop on Friday and that it fell today, but that doesn’t change the outcome of the IPO for Facebook, which raised $16 billion in the offering.

Further, the IPO generated so much demand, the Nasdaq faced a number of technical issues that could result in $13 million in compensation for bad trades, according to the Wall Street Journal. On Friday, trading was delayed about 30 minutes and throughout the day investors faced issues that prevented them from confirming their trades of the social network’s stock. Nasdaq executives say the exchange will use $10 million of its own proceeds from the IPO in addition to a standing $3 million cap on payouts to customers who suffer losses as a result of failures in the exchange’s systems. It’s possible that those technical issues led some investors to sour on the stock.

Now, without underwriters to prop up the stock as they did on Friday, the market is determining an appropriate price for the social network. Business Insider editor and CEO Henry Blodget writes that the IPO price valued Facebook at about 65 times its 2013 estimated earnings per share. Apple, on the other hand, is trading at only 10 times its estimated earnings per share. Google is trading at 12 times its estimated EPS. That’s not to say Facebook isn’t likely to one day be worth much more than it is today, but it’s difficult for the market to uphold a $100 billion valuation for a company with $3.71 billion in revenue and $1 billion in profit last year, especially when its margins seem to be declining.

As Facebook continues to grow, its operating costs are going to increase and its stock is likely to fluctuate, but Benchmark Capital partner Bill Gurley points to Amazon as an example Facebook might follow. The Internet company saw its stock linger below its $18 IPO price for almost two months before really picking up. Fifteen years later, the e-commerce company is trading around $218 per share.

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