Project on Social Networking Pekka Pärnänen, Maria Pienaar – FinNode/Finpro Silicon Valley Riku M ä kel ä , FinNode/Tekes Silicon Valley

Agenda MyNet project background Information Collected Main Trends in Social Networking Services Social Networking Business Models Social Networking Services Ecosystem Industry Examples Business Opportunity Map Summary

MyNet project background

Information Collected

Main Trends in Social Networking Services

Social Networking Business Models

Social Networking Services Ecosystem

Industry Examples

Business Opportunity Map

Summary

social networking opportunities Situation : Social Networking is the hottest phenomena in Internet right now. US is the biggest Social Networking market Tekes is planning to target funding into media space. MyNet project tightly connected & providing insight Solution: Joint effort with Finpro & Tekes: DuO MyNet – social networking opportunities study January 07 – Oct 07 Tied to and high priority as a Seed Project for FinNode, Finnish Innovation Center in California. Market opportunity/need/pull approach, not ’traditional’ technology push. Combining the latest in research and in business Bringing the Finnish players and US players on the same table business and research, speaking opportunities, meetings/tours, seminars. Geographical Interest: Main focus is in US because of the main players. MyNet

Situation :

Social Networking is the hottest phenomena in Internet right now.

US is the biggest Social Networking market

Tekes is planning to target funding into media space.

MyNet project tightly connected & providing insight

Solution:

Joint effort with Finpro & Tekes:

DuO MyNet – social networking opportunities study January 07 – Oct 07

Tied to and high priority as a Seed Project for FinNode, Finnish Innovation Center in California.

Market opportunity/need/pull approach, not ’traditional’ technology push.

Combining the latest in research and in business

Bringing the Finnish players and US players on the same table

business and research, speaking opportunities, meetings/tours, seminars.

Geographical Interest:

Main focus is in US because of the main players.

SPINN-OFF projects 12-24 months LBS Joint Finpro & Tekes NETWORKS – in US and in Finland Main deliverables Dynamic projects / opportunities generated Long-term focused multi-client projects generated from MyNet project MyNet Next Steps / Spin-off Projects MARKET OPPORTUNITY MAP Mobile Content Services MyNet -project, 10 months Finnish Infrastucture match-making of key people speakers to major US events US Access 2-3 events connections to key players - opportunities Information Exchange / Awareness Match-making Market pull opportunities -VC Technology / Research Collaboration Industry-Research models Established companies in US Ideas to Finland 1-3 cases - teamwork / team building

Finnish

Infrastucture

match-making

of key people

speakers to

major US events

US Access

2-3 events

connections to

key players

- opportunities

Information

Exchange /

Awareness

Match-making

Market pull

opportunities

-VC

Technology /

Research

Collaboration

Industry-Research

models

Established

companies in US

Ideas

to Finland

1-3 cases

Information Collected Trends Business models Opportunities (biz, collaboration, funding, reseach, …) What have been the eye openers Timing, when and what Ecosystem, now and then, how will it change/develop Community relationships & collaboration How to build visibility, viral aspects Legal aspects, ownerships Copyrights, DRM Mobility, when would it happen and how, convergence Technological barriers, change Other barriers, mental, organizational, social/demographics, etc, change What is needed to boost social networking Where is it going, what’s Social Networking 3.0, where are we now The role of open source/collaborate development Operators role now and then (SN 3.0) Connection between physical networks and virtual/social networks The goal is to find Market Opportunities!

Trends

Business models

Opportunities (biz, collaboration, funding, reseach, …)

What have been the eye openers

Timing, when and what

Ecosystem, now and then, how will it change/develop

Community relationships & collaboration

How to build visibility, viral aspects

Legal aspects, ownerships

Copyrights, DRM

Mobility, when would it happen and how, convergence

Technological barriers, change

Other barriers, mental, organizational, social/demographics, etc, change

What is needed to boost social networking

Where is it going, what’s Social Networking 3.0, where are we now

The role of open source/collaborate development

Operators role now and then (SN 3.0)

Connection between physical networks and virtual/social networks

Overview of Companies Interviewed Over 30 companies Interviewed and 20 related events & panel discussions attended Mobile & Internet Social Networking Startups MBuzzy, Kaboodle, Dogster, Catster, Vavaz, Tiny Picures, Loopt, Bluepulse Internet, ISP & Search Google, Yahoo! Publishers Hearst Magazines Studios, Media Companies & Labels MTV, Sony, EMI, Universal, Disney Mobile Advertising Agencies & Platforms SFP Cundari, Admob, Amobee Investment Community, VC’s, Analysts & Advisrs Norwest Venture Partners, CMEA, Guidewire Legal - Attorneys Hertz & Lichtenstein LLP Carriers Vodafone, BT Group, SK Telecom Retail Retail Entertainment Design Enterprise/Office 2.0 Collaborative Strategies, Mashery Research UC Berkeley, Standord, SRI Handset vendors Nokia and Nokia Research Center

Over 30 companies Interviewed and 20 related events & panel discussions attended

Mobile & Internet Social Networking Startups

MBuzzy, Kaboodle, Dogster, Catster, Vavaz, Tiny Picures, Loopt, Bluepulse

Internet, ISP & Search

Google, Yahoo!

Publishers

Hearst Magazines

Studios, Media Companies & Labels

MTV, Sony, EMI, Universal, Disney Mobile

Advertising Agencies & Platforms

SFP Cundari, Admob, Amobee

Investment Community, VC’s, Analysts & Advisrs

Norwest Venture Partners, CMEA, Guidewire

Legal - Attorneys

Hertz & Lichtenstein LLP

Carriers

Vodafone, BT Group, SK Telecom

Retail

Retail Entertainment Design

Enterprise/Office 2.0

Collaborative Strategies, Mashery

Research

UC Berkeley, Standord, SRI

Handset vendors

Nokia and Nokia Research Center

Social Networking Main Trends Social media services becoming platforms for other communities Large non-SNS community owners getting serious about SNS Traditional email and search companies starting to loose ground – looking at how to leverage SNS These companies still have largest communities e.g. Yahoo! Groups over 300 million users Handset vendors e.g. Facebook deal with RIM and Microsoft, Nokia Nokia has the largest global community with over 1B phones in market & biggest camera manufacturer Carriers starting to leverage SNS business models Media (tv), social network and virtual reality converging - Laguna Beach from MTV Porting of the experience between different platforms - media, Internet, mobile, virtual reality, social network services (SNS) such as Myspace, Facebook Branding - moving from old style broadcast to user interaction with brand UGC - everyone trying to figure how to deal with it - what copy right to protect and what to allow users to edit and share. Work - collaborative tools and services are being taken into the work place from the Internet - IT having security and management issues. Biz models - ads still main source followed by subscription and transaction based. In virtual worlds, ads vs. virtual items trending to 2/3 vs 1/3 split. Investment community want to see play across as many models possible to split risk.

Social media services becoming platforms for other communities

Large non-SNS community owners getting serious about SNS

Traditional email and search companies starting to loose ground – looking at how to leverage SNS

These companies still have largest communities e.g. Yahoo! Groups over 300 million users

Handset vendors e.g. Facebook deal with RIM and Microsoft, Nokia

Nokia has the largest global community with over 1B phones in market & biggest camera manufacturer

Carriers starting to leverage SNS business models

Media (tv), social network and virtual reality converging - Laguna Beach from MTV

Porting of the experience between different platforms - media, Internet, mobile, virtual reality, social network services (SNS) such as Myspace, Facebook

Branding - moving from old style broadcast to user interaction with brand

UGC - everyone trying to figure how to deal with it - what copy right to protect and what to allow users to edit and share.

Work - collaborative tools and services are being taken into the work place from the Internet - IT having security and management issues.

Biz models - ads still main source followed by subscription and transaction based. In virtual worlds, ads vs. virtual items trending to 2/3 vs 1/3 split. Investment community want to see play across as many models possible to split risk.

Social Networking Business Models Advertising funded models still rule Agencies do not agree with ”premium” for CPM (Cost Per Mille/Impression per thousand) for SNS sites - will not be able to keep CPM’s up Need to have large base & compelling ad inventory to drive CPM’s Pixel share e.g. Facebook model Branded sponsorship models Advertorials Targeted social adverticing (Facebook launch 7.11.07) ” Freemium” services to attract & seed community Incentive based models becoming more prevalent e.g. gifting Mobile will be driving this due to interaction & context Transaction based models Virtual goods, credit card, prepaid/gift cards Subscriptions Licensing & Syndication models - Office 2.0 & music content sales (catalogs) Community data sales Usage data, user profiles, marketing lists, surveys, social community graphs “ Paid-to-action” e.g. referral to services, applications and goods on Facebook Retail e.g. games Monetization still remains a challenge  Build multiple revenue streams

Advertising funded models still rule

Agencies do not agree with ”premium” for CPM (Cost Per Mille/Impression per thousand) for SNS sites - will not be able to keep CPM’s up

Need to have large base & compelling ad inventory to drive CPM’s

Pixel share e.g. Facebook model

Branded sponsorship models

Advertorials

Targeted social adverticing (Facebook launch 7.11.07)

” Freemium” services to attract & seed community

Incentive based models becoming more prevalent e.g. gifting

Mobile will be driving this due to interaction & context

Transaction based models

Virtual goods, credit card, prepaid/gift cards

Subscriptions

Licensing & Syndication models - Office 2.0 & music content sales (catalogs)

Community data sales

Usage data, user profiles, marketing lists, surveys, social community graphs

“ Paid-to-action” e.g. referral to services, applications and goods on Facebook

Retail e.g. games

Monetization still remains a challenge

 Build multiple revenue streams

SNS Ecosystem – Collaborative Partnerships Create/Edit Share Discover Distribute EXPERIENCE VALUE WISP Mobile Carrier Community Provider (SNS site) Consumer Muni WiFi & Hotspots ISP Cable Studios & Labels Content Aggregators Media Print Media Application Providers Advertising Enablers Developers Games Publishers Search Technology Enablers Device Vendors Other SNS Sites Other SNS sites Advertising Agencies Transaction Enablers Device Vendors Access Brands You SNS Ecosystem – Collaborative Partnerships Create/Edit Share Discover Distribute EXPERIENCE VALUE Consumer Publishers Wireline BB Carrier Wireless BB Carrier Brands & Advertisers Content Publishers Tool & Platform Providers Micro Community Distribution Channels

Industry Examples

Case: Company Launched on 2/2004 in Harvard. Founded by Mark Zuckerberg (now 23 years). HQ in Palo Alto 6/04. Revenue $150 million (2007 estimated), employees 300+ (July 2007), looking for 400 people. Investors: Greylock, Meritech, Accel and others; $38.2 million into Facebook since 2004. 10/2007 Microsoft’s 1.6% stake @ $240M -> Facebook “valuation” @ $15B (in 3.5 years). Trends From exclusive Harvard College student site to Ivy League schools in 2 months. And then to anybody. 5/07 application platform to developers. Now 100,000 registered developers and 6,600 applications. 60 million subscribers (MySpace 110 million users) and the fastest growing social media network service/ widget platform. 250,000 new users a day. Business models Pixel-share biz model, Facebook as an aggregator. Internal viewer acquisition market (average c20/user). Challenges / opportunities Build your application on top of Facebook! Music sharing site iLike took 6 months to sign first million users, with Facebook iLike got 1 million users in one week! 10 million fund to provide grants for 3rd party applications that rely on the Facebook developer platform. Between $25K and $250K to successful applicants. Sorry I couldn’t attend, Dudes! Surf’s up! ;-)

Company

Launched on 2/2004 in Harvard. Founded by Mark Zuckerberg (now 23 years). HQ in Palo Alto 6/04.

Revenue $150 million (2007 estimated), employees 300+ (July 2007), looking for 400 people.

Investors: Greylock, Meritech, Accel and others; $38.2 million into Facebook since 2004. 10/2007 Microsoft’s 1.6% stake @ $240M -> Facebook “valuation” @ $15B (in 3.5 years).

Trends

From exclusive Harvard College student site to Ivy League schools in 2 months. And then to anybody.

5/07 application platform to developers. Now 100,000 registered developers and 6,600 applications.

60 million subscribers (MySpace 110 million users)

and the fastest growing social media network service/

widget platform. 250,000 new users a day.

Business models

Pixel-share biz model, Facebook as an aggregator.

Internal viewer acquisition market (average c20/user).

Challenges / opportunities

Build your application on top of Facebook!

Music sharing site iLike took 6 months to sign

first million users, with Facebook iLike got

1 million users in one week!

10 million fund to provide grants for 3rd party applications

that rely on the Facebook developer platform. Between

$25K and $250K to successful applicants.

Case: Company Launched 2005 Help people express themselves & tell stories through photos & videos Largest personal media network 134+ million people view Slide widgets per month Before Facebook – 22 nd most trafficed Wed site Trends Top 4 applications on Facebook Own destination site & advertiser relations In 4 months > 53 mil app downloads 11% daily active users After Facebook Reaches 30% of US Internet audience 2/3 rd of Facebook users have installed a Slide app Business models Own advertising revenues, product placement Facebook ad revenue share Actively acquires 3 rd party applications Challenges / opportunities Hub for image management across multiple SNS sites

Company

Launched 2005

Help people express themselves & tell stories through photos & videos

Largest personal media network

134+ million people view Slide widgets per month

Before Facebook – 22 nd most trafficed Wed site

Trends

Top 4 applications on Facebook

Own destination site & advertiser relations

In 4 months > 53 mil app downloads

11% daily active users

After Facebook

Reaches 30% of US Internet audience

2/3 rd of Facebook users have installed a Slide app

Business models

Own advertising revenues, product placement

Facebook ad revenue share

Actively acquires 3 rd party applications

Challenges / opportunities

Hub for image management across multiple SNS sites

Case: Dogster.com Service SNS where each dog has its web page and connections Trends People invest to their pets annually 36 billion dollars in the USA Dog owners tend to socialize with other dog owners Business models Sponsorships for brands Advertising with advertorials and banner ads Virtual gifting Premium service $20/year Challenges / opportunities ‘ Community is about passion sets: find out what they are and keep that as the core. Link everything to them’ Niche can be profitable: 10 000 members is good if that is a special group

Service

SNS where each dog has its web page and connections

Trends

People invest to their pets annually 36 billion dollars in the USA

Dog owners tend to socialize with other dog owners

Business models

Sponsorships for brands

Advertising with advertorials and banner ads

Virtual gifting

Premium service $20/year

Challenges / opportunities

‘ Community is about passion sets: find out what they are and keep that as the core. Link everything to them’

Niche can be profitable: 10 000 members is good if that is a special group

Case: Tree-nation.com Company Spanish social network service, whose community members can plant trees in the desert of Niger to combat desertification and land degradation Trends Fight against climate change SNS as a tool for grass roots movements Business models For-profit business that wants to make a difference Free community membership Pay for real trees Individuals and organizations as paying customers Challenges / opportunities In beta phase now.

Company

Spanish social network service, whose community members can plant trees in the desert of Niger to combat desertification and land degradation

Trends

Fight against climate change

SNS as a tool for grass roots movements

Business models

For-profit business that wants to make a difference

Free community membership

Pay for real trees

Individuals and organizations as paying customers

Challenges / opportunities

In beta phase now.

Market Opportunities

Social Networks “Movement” EXISTING MOBILE PC NEW MySpace Facebook Twitter Midomi Slide Tree-Nation MOSH NEW OPPORTUNITIES

SNS Ecosystem – opportunities Create/Edit Share Discover Distribute EXPERIENCE VALUE Community Provider (SNS site) Consumer Increase loyalty Efficiency/better use Reach & access Rich media communications Seamless user experience Discovery across communities Mash-up functions/tools Mobility Context Monetization Open platforms Management tools/platforms DRM Social Media Optimization (SMO) Identity management -Wider and deeper reach -Targeted services Community management Self-supported/servicing Efficient communications Content control and monitoring -Distribution/reach -Community marketing -Awareness -Monetization flexibility -Talent scouting -Instant feedback/discussion -Media interaction -Community Marketing… -Sizable market/big enough community -Measured campaign effectiveness -Brand interaction -Reach -New platforms besides ads -Engagement/relevant -Brand control and monitoring -Rich media comms -Ease-of-use -Discovery -Social connections -Identity management -Entertainment -Relevance -Scaling capabilities -Dominance, focus -> wider -Open platform, alliances -> DeFacto -Big enough for ads -Self-expression -On-line identity -Social need -Create/Edit->Share->Discover ->Distribute Consumer Publishers Brands & Advertisers Content Publishers Tool & Platform Providers Micro/Niche Community Distribution Channels

Increase loyalty

Efficiency/better use

Reach & access

Rich media communications

Seamless user experience

Discovery across communities

Mash-up functions/tools

Mobility

Context

Monetization

Open platforms

Management tools/platforms

DRM

Social Media Optimization (SMO)

Identity management

-Wider and deeper reach

-Targeted services

Community management

Self-supported/servicing

Efficient communications

Content control and monitoring

Summary – Social Networking Major SNS sites becoming open platforms Attract more and retain users New entrants using existing SNS platforms as “OS platform” to gain traction Data storage, communication with users & other sites & developers e.g. Slide Collaboration and co-opetition 3 rd Party application providers actively compete with Facebook’s own applications Leverage as many SNS sites as possible to create visibility: SMO Social Media Optimization Opportunities for enablerers How to mobilize SNS sites, messaging, others Rapidly changing landscape

Major SNS sites becoming open platforms

Attract more and retain users

New entrants using existing SNS platforms as “OS platform” to gain traction

Data storage, communication with users & other sites & developers e.g. Slide

Collaboration and co-opetition

3 rd Party application providers actively compete with Facebook’s own applications

Leverage as many SNS sites as possible to create visibility: SMO Social Media Optimization

Opportunities for enablerers

How to mobilize SNS sites, messaging, others

Rapidly changing landscape

Pekka Pärnänen, Maria Pienaar – FinNode/Finpro Silicon Valley Riku Mäkelä – FinNode/Tekes Silicon Valley 3945 Freedom Circle, Suite 110 Santa Clara, CA 95054, USA [email_address] [email_address] [email_address]