MediaFile

Facebook’s new class of apps expand the social vocabulary

Alexei Oreskovic

Jan 19, 2012 11:11 EST

Time was when “liking” something on Facebook was the standard way to recommend something on the social network.

Now Facebook users will have a whole new vocabulary at their disposal so they can tell friends they “want” tickets to an upcoming rock concert, they are “cooking”  a certain dish or that they “ran” five miles in the park after work.

On Wednesday evening, Facebook announced the availability of more than 60 third-party appsthat can be integrated directly into Facebook, including apps from Ticketmaster, Airbnb, Foodspotting and Pinterest. Facebook also said that any software developer can now create their own such specialized apps for Facebook integration and submit the app to Facebook for approval.

Once you begin using one of these apps, your interactions within the app – say clicking on a dish you see in Foodspotting to note that you have “tried” it – are broadcast to the Facebook “ticker” for all your friends to see.  The apps are also integrated into each user’s Timeline – the revamped version of a user’s personal profile page that Facebook has been gradually rolling out to its more than 800 million users.  Now when you visit a friend’s Timeline, for instance, you might see a special section showcasing the top movies they’ve indicated that they want to see on the Rotten Tomatoes app, or the latest hotel reviews they’ve written with the TripAdvisor app.

The new apps are part of the so-called open graph feature that Facebook rolled out at its developer conference in September. The initial open graph rollout focused on integrating media apps from partners such as Spotify and Yahoo into Facebook, allowing users to notify friends of the music they were listening to, the news articles they were reading and the videos they were watching.

With the latest move, Facebook has opened itself up to a broader world of activity that can relate to just about anything an app-maker can think of. Among the initial third-party apps are ones that involve travel, food, fashion and fitness.

It’s a good bet that there will soon be open graph apps in even more categories, now that Facebook has opened the doors and effectively given software developers carte blancheto go wild (so long as the apps adhere to Facebook’s basic terms of service, of course).

Why are cheap startups so expensive?

Kevin Kelleher

Jan 13, 2012 13:13 EST

Starting up a Web company is never easy, but at least it’s not as expensive as it used to be. Instead of buying and maintaining an IT infrastructure, as they had to do in the dotcom boom, startups now turn to cloud server services like Amazon’s. Instead of costly proprietary software, OpenOffice and Google offer cheaper (or free) options. Instead of paying office rent, employees can work from home. And the viral power of social media can bring new customers with little marketing. Open-source projects and the durability of Moore’s Law promise to lower costs even further.

But if it’s cheaper than ever to fund a startup’s growth, why are some Web companies receiving hundreds of millions of dollars in financing? And why are valuations rising quarter after quarter, to the point where some venture capitalists are complaining that certain startups have simply gotten too expensive to invest in? How is it that Web companies are becoming both cheaper and more expensive? Are VCs valuing companies on fundamentals, or following the market’s momentum?

Such questions might seem academic, except that the gap between startup costs and valuations keeps widening. The last six months alone have seen a surprising number of nine-digit venture rounds. In July, Airbnb, a home-sharing startup that had 130 employees, raised $112 million in a round that valued the company at $1.3 billion. A week later, Twitter, which had 600 employees, raised $800 million (half going to cash out early investors), valuing it at $8.4 billion. In October, online-storage company Dropbox, another small company of 70 employees, said it raised $250 million in a round valuing the company at $4 billion. And just last month, group-buying company LivingSocial closed a $176 million round, vowing to raise an even larger amount in the coming months.

There are two key reasons for such outsize venture investments – one strategic and one emotional. The strategic is that startups that have built a loyal customer base and strong word of mouth often solicit big investments to scale up in a nascent or highly competitive market. So, for example, Airbnb is building on its early success to expand internationally and bring in more users. And LivingSocial is looking for a bigger share of a group-buying market that once belonged to Groupon.

“There’s not a lot of value in second place,” Ryan Moore, a partner at Atlas Venture in Cambridge, Massachusetts, told Reuters. “If you have an interesting model, you spend aggressively and build aggressively to win in your category. There are a lot of situations out there where people are betting big.” In accepting a large investment round, a small startup may be banking on ambitious growth, or even preparing against the risk that the capital markets may slow down.

The second, more emotional reason is that these companies are raising all that money simply because people are willing to give it to them. This is especially common in early rounds, where valuing a startup relies less on metrics. As a result, the correlation between what it costs a company to grow successfully and what investors decide it’s worth has become looser, especially in Internet startups.

“You have companies raising far more money than they know what to do with, simply because valuations are high,” says Josh Goldman, a partner at Norwest Venture Partners. “They can raise money now – and put it away for a war chest or for future needs that they can’t even anticipate now – because investors are tripping over themselves to give it to them.”

Me Too: More funding for HouseTrip.com

Me Too is a scorned strategy among many entrepreneurs, but it sometimes works quite well.

Case in point: HouseTrip.com, which just lined up another $17 million in funding from investors including Index Ventures and Balderton Capital. Think of the company, which was founded in Switzerland and allows homeowners to rent out their properties on a short-term basis, as a kind of HomeAway or Airbnb, but with European flair. Its top destinations include Paris, London and Barcelona; rentals include a houseboat in Amsterdam and a cave house in Santorini.

HomeAway did very well for its VC backers, including Redpoint Ventures and Institutional Venture Partners,  raising $216 million in an IPO in June.  Shortly afterwards,  Airbnb.com — which allows people to rent out rooms and sofas as well as entire houses or apartments– raised $112 million from backers like Andreessen Horowitz and DST Global.

While entrepreneurs say they prefer to get creative, copycat companies often reel in big bucks. LivingSocial, the daily-deals site that followed Groupon, is said to be raising $200 million at a $5 billion valuation. Online-based ventures seem particularly easy to copy; scores of companies are building businesses on variations of existing start-ups such as microblogging service Twitter and games company Zynga.

HouseTrip has some ground to cover before it catches up to the more established sites. It’s generated bookings for about 500,000 nights so far, compared to 2 million nights at Airbnb. But still, that’s not bad for a site that launched early last year, compared to Airbnb’s 2008  headstart.

Earlier this year, HouseTrip won $2.9 million in Series A funding from Index.

Shoes, glorious shoes (even in footloose Silicon Valley)

Silicon Valley is known for being more fleece than Ferragamo. But former Google executive Sukhinder Singh Cassidy is working on giving the place a makeover via her new shopping site, Joyus.com. Unlike other high-end shopping sites such as Gilt Groupe and Rue La La that are based in the fashion hub of New York, Joyus calls the dress-down Bay Area home.

That means she raises lots of eyebrows with her wardrobe. The picture below, snapped by a friend in the audience and uncropped, shows Singh onstage at tech confab AllThingsD Asia last month with Airbnb CEO Brian Chesky and SurveyMonkey CEO Dave Goldberg. No prize for guessing which shoes are hers.

Ironically, given her love for shoes, she says they are one of the toughest sells on her site, which features products ranging from cosmetics to baby presents to clothing in limited-time sales.

“We are still cracking the code on shoes,” she told Reuters. The category has “done fine, but it hasn’t knocked it out of the park.”

Meanwhile, she endures ribbings from her less-well-turned-out cronies in Silicon Valley. At a recent meeting with Twitter, she says CEO Dick Costolo paid her a mocking compliment on the high-heeled black ankle boots she donned that day, before admitting he wasn’t much of a fashion expert.

“Dick,” she says she shot back, “I can help.”

Tinsel town turns deaf ear to Kutcher’s request to plug his start-ups

Ashton Kutcher may have more clout in Silicon Valley than in Hollywood.

The star of movies like “Dude, Where’s My Car?” and now of the hit show ‘Two and a Half Men” told conference goers at TechCrunch Disrupt that he tried to get the studio to plug some of his Internet start-up investments on the show– but they wouldn’t do it without compensation.

Kutcher, who said he majored in biochemical engineering in college, has invested in some of Silicon Valley’s hottest companies. His bets include check-in service Foursquare, bed-and-breakfast service Airbnb, and personalized magazine Flipboard.

He also said he invested in companies that he thought ultimately would contribute to greater happiness in the world– but won’t open his wallet unless he clicks with the entrepreneur. “At the end of the day it’s about the person who runs that company, and whether it’s a person I’d want to spend some time with,” he said.

While sometimes he likes to go stealth to avoid his name getting in the way of potential customers paying attention on the underlying business, he thinks he brings more than just star power to his start-ups.

“I have pretty good connectivity in marketing,” he said. “I have pretty good product savvy.” And when he draws on his network of contacts to call in a favor for one of his companies, “they generally will call me back.”

But Kutcher really brought the house down when he explained how he got to San Francisco– a seat on no-frills airline Southwest. Given the short trip from Los Angeles, “I feel bad taking a private plane from there to here,” he said. “It’s not very energy efficient.”