Groupon Stock Drops 12% As Customer Refunds Increase

While other IPOs such as LinkedIn and YELP have had tremendous recent success, social buying startup Groupon has been on a bit of a roller coaster ride and it looks like they just went over a steep drop.  The stock is down over 10% today on news that four-quarter revenue and income is down due to a higher than expected number of customers asking for refunds.
Groupon is a social buying service that allows users to buy specific items at discount as long as a large number of people participate in a given deal.  For example, a massage parlour can offer 30% off their regular price, as long as 100 people purchase the deal.  This incentivizes users to invite their friends to participate in the deal, and if the 100 number is hit, the deal is activated.
The problem is that a lot of businesses have not prepared themselves for the influx of customers, and the poor service has sometimes led to users demanding refunds.  Another anecdotal reason for the refunds is that the deals are often so enticing that people begin to hoard massive numbers of deals, but then realize they probably won’t need to cash in on 6 massages in the next few months.  Read more about the refund issue here.

As we can see in the chart, the stock began to rebound after a big hit in November during the IPO, and had reached heights above 20.  As reported in MarketWatch, Justin Post of Bank of America/Merrill Lynch had recommended a buy on the stock, but the company has not performed as well as hoped.

“Groupon has been our most disappointing call in 2012 as we thought 4Q margin upside, a rebound in 4Q take rates, and data suggesting an improving competitive landscape would improve sentiment on the stock,” wrote Justin Post of Bank of America/Merrill Lynch in a note to clients on Monday.

This is a far cry from when Google was attempting to buy the company at a valuation of $6B, although today’s price does have its market capitalization at $8B… but that number is falling fast.

Twitter Co-Founder: Spending Too Much Time On the Site is ‘Unhealthy’

Biz Stone, a cofounder of Twitter, told an audience in Montreal this week that spending up to 12 hours a day on the platform is not necessarily a great idea.
“To me, that sounds unhealthy,” he said on Wednesday at the Board of Trade of Metropolitan Montreal business conference, according to a report in The Guardian. Stone told the audience that users should leave the site after they found the information they were looking for.
“I like the kind of engagement where you go to the website and you leave because you’ve found what you are looking for or you found something very interesting and you learned something,” Stone said, according to the report.”I think that’s a much healthier engagement. Obviously, we want you to come frequently.”
Twitter doesn’t provide stats on the average amount of time users spend on the site. Alexa, however, pegs that time at about four and a half minutes a day on the site. According to a 2009 report by Sysomos, only 1.13% of Twitter users update more than 10 times a day. Some 85.4% of Twitter members tweet zero times a day and about 6.5% tweet once a day.
The relative healthiness or unhealthiness of compulsive tweeting wasn’t the only subject that Stone discussed. He also described how he thought it was important for entrepreneurs to take pride in their mistakes. Before Stone helped create Twitter in 2006 with Jack Dorsey, Noah Glass and Evan Williams, he created a company that let people send broadcasts to iPods. “We thought we were geniuses,” Stone said, according to The Montreal Gazette. “It turns out it was called podcasting and people were already doing it.”
Stone also outlined his vision of social media — including Twitter — as a positive force. “The more connected we get through all social media, the more humanity can move as one,” he said. “Maybe I’m just being hallucinogenically optimistic, but the idea that once we’re connected we’ll be able to move together, suggests we’ll be able to get a lot more done in a lot shorter time.”

YouPorn User Emails and Passwords Exposed

Thousands of user emails and passwords from pornographic site YouPorn were exposed in a security breach, the Associated Press reports.
The security breach was allegedly caused by a third-party chat service, which “failed to take the appropriate precautions in securing its user data,” according to Kate Miller, spokeswoman of YouPorn parent company Manwin Holding SARL. YouPorn has shut down the breached server and notified its users about the security breach.
To make matters worse, a list of user emails and accompanying passwords (in plain text) is already circulating online. The list contains some 6,400 passwords, and it’s already been widely publicized, looked over and analyzed – for example, a word cloud of the most popular passwords from the site has been created by researcher Ashkan Soltani.
YouPorn is one of top 100 visited websites on the internet according to Alexa, which makes this security breach a high profile one. It’s also highly embarassing for users, many of which probably do not want to be publicly associated with a pornography site.
The lesson to be learned from the incident is the usual one: do not use the same login credentials for multiple sites. Additionally, if you use services such as this one, choose an e-mail and/or login and password that cannot easily identify you.

Apple, Google, And Others Agree To Mobile App Privacy Policy Guidelines

Though Apple, Google, Microsoft, RIM, Amazon, and HP don’t always see eye-to-eye, the six of them have entered into an agreement brokered by California Attorney General Kamala Harris to take a tougher stance on the issue of mobile privacy.
Going forward, the six companies involved must provide users with a privacy policy if the app in question collects personal information. Though the move will affect the app submission and downloading process for users the world over, it was designed to bring those six companies into compliance with California state law.
“The majority of mobile apps sold today do not contain a privacy policy,” Harris said. “By ensuring that mobile apps have privacy policies, we create more transparency and give mobile users more informed control over who accesses their personal information and how it is used.”
It isn’t just enough for these companies to provide app-specific privacy policies to their users; they must also do it before the user downloads it, creating a much-needed means for them to opt-in. Apple and company also need to be consistent in how they display that information, as the agreement Harris brokered called for “a consistent location for an app’s privacy policy on the application-download screen.”
On top of that, users will also be given tools to help police their respective app stores. The terms of the agreement note that the platforms in question will allow users to report non-compliant apps, which could bring about some welcome change in some respects — while the Android Market already allows users to flag questionable apps, the iOS App Store and the Windows Marketplace don’t give users that power.
The past few weeks have made the mobile privacy issue a hot-button topic outside of the tech sphere, and the attention doesn’t just end with California’s AG — two congressmen sent a letter to Apple CEO Tim Cook posing questions about user data privacy, and the White House will be holding an online meeting tomorrow to accompany the release of a white paper on online privacy. Regardless of how this privacy discussion began, don’t expect for the talk to subside any time soon.

Mobile Advertising Is The Baby Huey Of The Media World (And Apple Is Taking The Low Road)

Editor’s Note: This guest post was written by Frank Barbieri, a serial entrepreneur and sometime blogger. You can follow him @frankba.
I had dinner last week with a senior exec from a global advertising holding company who asked what I often get asked these days, “What’s going on with mobile advertising?” it’s a timely question as last week Apple announced they were lowering the buy-in price for iAds from $500,000 to $100,000 and increasing the publisher revenue share from 60% to 70%. The move seems innocent enough, but with a little inspection is actually very worrying for a segment still struggling to shake off its inferiority complex, and potentially chilling for many innovators and entrepreneurs.
You would think that the Flurry data posted late last year on exponential mobile adverting inventory growth late last year would correlate with an industry finally reaching maturity. But a couple weeks after that data posted I had a conversation with a Fortune 100 senior media buyer who became bearish on mobile ad spending in 2011.
This person has a total media budget in the tens of millions annually, and for the first time since she started buying mobile, she decreased her spend over the previous two quarters and expects to decrease even more in 2012. Why? Perceptual and brand attitudinal data consistently comes back as not even outperforming search engine marketing.
Mobile advertising has become the Baby Huey of the media world: it’s huge and lumbering, but not mature. Analytics, measurement and targeting have not caught up to where online is, exactly when we’re hearing inventory volume is set to surpass online. Neither Comscore nor Nielsen rank the top mobile apps like they rank the top online properties by category and unique users. Nor do they rank ad networks. Phone and operating system manufacturers as well as the carriers have created fragmented and feature poor cookie environments on phones. What is seen as standard operating procedure online, the use of cookies to target users and understand usage, is treated as heresy in mobile.
This lack of basic advertising infrastructure means it’s hard to manage and measure brand campaigns. Performance is a different story as you just spray massive volume and pay for the converted. But with brand advertising you have to tune the campaign to give the right audience the right message the right amount of times in the right context to move the needle on campaign objectives. All this becomes near impossible without the simple help of a cookie. Only in isolated cases is buying brand advertising on mobile valuable. For instance buying direct from content brands with huge audiences and registered targeting data, like Pandora and The Weather Channel. Or buying video where brand studies still consistently show attitudinal value. Otherwise it’s just too hard to buy quality at scale.
Look at the somersaults Millennial Media, the largest North American “independent” ad network undergoes just to try and replicate simple cookie functionality to target a unique user (from their S1 filing):

MYDAS then runs a proprietary set of algorithms to analyze multiple data points from the device, carrier and app to statistically determine, on an anonymous basis, the likely unique user of the device and the app requesting the ad.

Seriously. Enter hoop, commence jumping. Ad platform managers I’ve spoken with are now worried that even this will get worse as Apple deprecated unique phone identifiers in iOS 5 and is poised to cloak UDIDs from apps in iOS 6. This is one of the data points Millennial surely uses as do many ad platforms and it means there will be one less credible way to ensure a unique user is targeted. This means brand advertisers will again buy less at lower prices.
No doubt consumers have strong opinions about companies using and storing data on their phones, and they should have controls and transparency. But shouldn’t the browsers at least shoot for parity with the web? Isn’t that a better experience for consumers in the end? Where cookie infrastructure feeds a revenue model and users always have the option to turn cookies off. That revenue model in turn allows great content and apps to flow. Simple unique user targeting is foundational to online ad spending and in mobile we’re using magic potions to describe a “likely” unique user. Ad spend will never catch up to online with these constraints. That will eventually hurt developers and end users’ access to great content and apps.
Apple’s strategy now is to help itself while it hurts the industry. iAds can identify unique users through iTunes registration and maybe they’ll even reserve UDID information for themselves as a trusted steward of consumer privacy. It just so happens that that stewardship creates an unfair advantage in the ad network space where networks will have trouble competing. Machiavelli would have noted with glee the timing of the announcement and Millennial Media’s expected upcoming IPO.
Frankly Apple doesn’t care as much about advertising revenue as they do about happy publishers. As the lack of ad infrastructure depreciates the value of developer inventory, Apple is providing a life support alternative in the form of higher revenue shares. This is a short-term fix and bad for the industry as buyers like the one referenced at the beginning of this post want to see a vibrant ecosystem of sellers and selling technology to increase their spend to online levels. The move is bad for most publishers no matter what the revenue share.
Apple could have easily taken a position to build quality and value in the mobile brand advertising ecosystem by addressing the infrastructure problems rather than pretending that they alone can support the segment. As one platform product manager put it to me, They could have designed a “reliable, and privacy conscious third-party tracking mechanism” that all networks and developers could use. This would help networks and brands to better track and target users and ad usage across properties, web and app. It would lead to a well spring of new ad innovation on iOS devices. This would have started to build the infrastructure for brand buying at scale with confidence and credibility. Users would get higher quality advertising. Developers get more dollars and Apple wins by having happy developers.
What they did instead is tell advertisers they are slashing prices and opening up the bargain bin. And they told developers that they’ll be happy with the new benevolent ad dictatorship and sole innovator. Shame. Mobile advertising was very close to its Cinderella moment, and Apple just decided to keep the glass slipper and close the ballroom doors.

Beyond Facebook: The Rise Of Interest-Based Social Networks

Editor’s Note: This guest post is written by Jay Jamison, a Partner at BlueRun Ventures, who focuses on early stage mobile, consumer and enterprise investments. He also serves on the boards of AppCentral, AppRedeem, Foodspotting, and Thumb. You can follow Jay on Twitter @jay_jamison or read his blog at www.jayjamison.com.
With the pending public offering of Facebook anticipated to be the largest tech IPO in history, it’s an interesting time to think about where we go from here. Some say “social is done,” Facebook is all the social media anyone would ever want or need. Unquestionably, as it nears one billion accounts, in the solar system of social media, Facebook is the Sun — the gravitational center around which everything social revolves.
But while some may pronounce that Facebook is all the social we’d ever need, users clearly haven’t gotten the memo. Instead, users are rapidly adopting new interest-based social networks such as Pinterest, Instagram, Thumb, Foodspotting, and even the very new Fitocracy. (Disclosure: BlueRun Ventures is an investor in Thumb and Foodspotting.)
The numbers tell the tale around users’ appetites for these new interest-based social networks. Pinterest, the increasingly popular virtual pinboard, crossed 10M monthly unique users in the US in January 2012, achieving 8 digits worth of monthly uniques faster than any site ever, comScore says. According to Silicon Valley uber-investor Ron Conway, Pinterest is growing like Facebook 5 years ago.
On Thumb, a community for instant opinions, user engagement has mushroomed in its short history. Users asking questions can expect to receive over 60 answers from other users within 5 minutes. As a result of this near instantaneous community engagement, Thumb’s average usage is currently second only to Facebook’s, and is far ahead of mainstream services including Pinterest and Tumblr, though on a smaller base.
What accounts for the fast growth of these interest-based social networks, and what does it mean for Facebook’s future?
Interest-based social networks have a markedly different focus and approach than Facebook. The Pinterest, Thumb and Foodspottings of the world enable users to focus and organize around their interests first, whereas Facebook focuses on a user’s personal relationships. Facebook offers us a social utility to deepen social connectivity with our existing social graphs, while these new interest-based social networks enable users to express their interests in new, engaging ways and offer authentic, high value connectivity with new people we don’t already know. The different approaches of these interest-based services are distinct from Facebook, and they are powering the massive growth and engagement we are seeing in these new services.
On Pinterest, I can curate and express my interests in Crossfit, cars and architecture, giving me the ability to create a strongly personal identity that draws me into new social relationships with people on the basis of my interests. Similarly on Foodspotting, I can easily express my love for ramen, which in turn connects me with other ramen fans who aren’t in my current social graph.
So if interest-based social networks focus first on an individual’s interest graph and Facebook centers on an individual’s social graph, which service will be the winner?
Both.
Humans are inherently social creatures, and we define ourselves both by the people we know and our interests. We make decisions about where to eat, what to buy, where to visit, etc. based on a complex matrix of social relationships, past experiences, location, long standing interests and future goals. Today’s platforms approach our lives from different angles but both are integral to how we define ourselves and interact with the world around us.
There are opportunities to establish differentiated, sustainable social media brands with large, passionate audiences. Much like the modern day media disrupters (e.g. ESPN or HBO or CNN), these services can establish new social media networks that are differentiated and unique, protecting them from the inevitable concern that they get squashed by Facebook. The traditional “Big 3 networks” (NBC, ABC, and CBS) used to be the only properties that really mattered, similar to how some view Facebook, Twitter and LinkedIn in today’s social media landscape. Emerging networks will be the new media brands and properties that augment social networking and media.
At the same time, the rise of these new interest based social networks does not really threaten Facebook, in fact, they are more likely to benefit Facebook. Specifically, Facebook has evolved itself brilliantly into not only an end user application drawing near to 1 billion accounts but also a robust, powerful platform other apps can leverage in order to drive more users to their services. Pinterest, Instagram, Fab, and many others have adopted Facebook’s Timeline API for precisely the reason of wanting to raise awareness of their services and drive more users to their sites. As these new services grow, more content gets pumped back to Facebook, Facebook’s platform gets more robust. Wash, rinse, repeat… Facebook’s positive feedback loop gains more momentum, and becomes more powerful.
In the words of Marc Andreessen, “Software is eating the world”, and in the world of social media, there is, for now, plenty of world to go around.

Pinterest – An In Depth Look at the Stats

There’s no big surprise to social media fans that Pinterest is blowing up.  It’s recently become a site that has traffic in the top 100 sites on the web, and rumors have it valued around $200m.  That’s a lot for a company that doesn’t have much revenue.  But just how engaged are the users that use the service?  The folks over at RJMetrics put together a rigorous report to find out.
RJMetrics simply did some scraping to analyze a series of users by looking at their “Pin” boards over time, and see how they’d engaged.  They found some pretty incredible statistics, including the following.

• Pinterest is retaining and engaging users as much as 2-3x as efficiently as Twitter was at a similar time in its history.
• Pins link to a tremendously large universe of sites.  Etsy is the most popular source of pin content, but it only represents about 3% of pins.
• Over 80% of pins are re-pins, demonstrating the tremendous virality at work in the Pinterest community.  To contrast, a study done at a similar time in Twitter’s history showed that only about 1.4% of tweets were retweets.
• The quality of the average new user (as defined by their level of engagement and likelihood to remain active) is high but declining.  Users who have joined in recent months are 2-3x less active during their first month than the users that came before them.

There’s a lot more in the report, including a breakdown of the various sources of pins and the breakdown of how many people actually use the pinmarklet versus just repin other’s content.  There’s also a detailed cohort analysis which looks at various groups of users that joined the site and their behavior over the first twelve months of use of the site.  They find that the earlier users are the power users, but that most cohorts have stayed engaged on the site.
Head over and take a look at the report and let us know what you think.
Image: pedrosek via Shutterstock

Facebook Social Games [infographic]

Facebook is a social networking service and website launched in February 2004, operated and privately owned by Facebook, Inc. As of February 2012, Facebook has more than 845 million active users. Users must register before using the site, after which they may create a personal profile, add other users as friends, and exchange messages, including automatic notifications when they update their profile.
The fact that half of the population of the Internet plays social games on Facebook and Google+ caught our attention. That’s the reason we’ve compiled some very insightful stats from great authorities on social media and online games and put everything together in a brand new infographic we present to you today titled: What Makes Social Games on Facebook and Google+ so Popular?If you haven’t quite grasped the concept of why in the world are people so addicted to Mafia Wars and keep requesting your help to load up on weapons and armour…let us show you why in our detailed infographic:

Megaupload Data Safe for Another Two Weeks

The data on Megaupload will not be erased for at least two more weeks, Cnet reports citing Megaupload lawyer Ira Rothken.
The data on the file hosting service, whose founders have been accused of piracy and money laundering, was in danger to be erased as soon as Thursday, Feb. 2, as the site’s assets were frozen and it was unable to pay its hosting fees.
“The hosting companies have been gracious enough to provide additional time so we can work out some kind of arrangement with the government,” said Rothken.
The authorities have made backups of some of the data, which is to be used as evidence, but not all of it. The deletion of all the data on Megaupload would harm users which used the service for perfectly legal purposes.
One of the hosting companies which stores some of the Megaupload data, Carpathia hosting, told us they simply cannot return users their data. “Carpathia Hosting does not have, and has never had, access to the content on MegaUpload servers and has no mechanism for returning any content residing on such servers to MegaUpload’s customers.(…) We would recommend that anyone who believes that they have content on MegaUpload servers contact MegaUpload. Please do not contact Carpathia Hosting,” said Carpathia in a statement.
Hopefully, the authorities and Megaupload will find a solution to give the users a way to retrieve their data before it’s erased.
Megaupload founder Kim Dotcom (a.k.a. Kim Schmitz) and six others who ran the site were indicted by The U.S. Department of Justice (DOJ) in January. They are accused of making $175 and causing $500 million in copyright infringement; if they’re found guilty, they’re looking at a maximum 20 years prison sentence.