Will Google’s Wave Replace E-Mail—and Facebook?

I am back from Cali. Here’s a great story on Google wave from my colleague Olga Kharif.

Will Google’s Wave Replace E-Mail—and Facebook?
That’s how big Google’s vision is for its Wave social-networking/search service, which will have apps created by independent developers who sell them at a Google app store
By Olga Kharif

Google has big plans for Google Wave, its new online communication service—and they won’t all come from Google.

The Web search giant is hoping that software developers far and wide will create tools that work in conjunction with Wave, making an already multifaceted service even more useful. Google (GOOG) is even likely to let programmers sell their applications through an online bazaar akin to Apple’s App Store, the online marketplace for games and other applications designed for the iPhone. “We’ll almost certainly build a store,” Lars Rasmussen, the Google software engineering manager who directs the 60-person team in Sydney, Australia, that created Wave, told BusinessWeek.com. “So many developers have asked us to build a marketplace—and we might do a revenue-sharing arrangement.”

Combining instant messaging, e-mail, and real-time collaboration, Wave is an early form of so-called real-time communication designed to make it easier for people to work together or interact socially over the Internet. Google started letting developers tinker with Wave at midyear and then introduced the tool on a trial basis to about 100,000 invited users starting on Sept. 30. Invitations were such a hot commodity that they were being sold on eBay (EBAY). For Google the hope is that Wave, once it’s more widely available, will replace competing communications services such as e-mail, instant messaging, and possibly even social networks such as Facebook.

Read the rest of the story here.

Facebook Reaps Recruits at High Levels

Facebook Reaps Recruits at High Levels
Boosting hiring amid a job slump, Facebook snares Yahoo!’s security chief, an open-source guru from Six Apart, and talent from Genentech and Google

By Spencer E. Ante

So much for cutting back during the downturn.

As Facebook ramps up hiring from about 1,000 employees today to as many as 1,200 by the end of the year, the social networking giant is recruiting technical and business leaders from some of the best-known firms in Silicon Valley to help accelerate its financial performance.

Among the new hires at Facebook are Arturo Bejar, who will soon join as a director of engineering from Yahoo! (YHOO), and David Recordon, an open-source software expert from blogging software maker Six Apart, BusinessWeek.com has learned.

Bejar led Yahoo’s security team, and Recordon was one of the developers of the OpenID authentication software, according to Facebook. Other new hires include former Genentech (DNA) chief financial officer David Ebersman, now doing the same job at Facebook, and Greg Badros, a senior engineer from Google (GOOG) and now an engineering director at Facebook.

Read the rest of my BusinessWeek story here.

Middle East Censors Got You Down? How to Circumvent an Internet Proxy

Like many Americans, I have been riveted by the outpouring of dissent in Iran against the powers that be. It is amazing to see such a public expression of outrage in an oppressive society. And it is equally amazing that the government can’t seem to put a lid on it.

One fascinating element of this story is the role that the Internet is playing as an outlet for that dissent. There have been numerous reports that the Iranian government has blocked cell-phone calls and access to Facebook and other Web sites, and shut down text messaging services for two days.

So how do videos, pictures and blog posts keep popping up? Well, one reason may be that Iranian geeks are finding a way to run around the censors. Check out this video by Howcast, which was financed by the U.S. State Dep., which shows you how to circumvent Internet censors and keep publishing.

Making Social Media Pay Off

Last week, my colleague Steven Baker wrote a cover story with the provocative question: What’s a Friend Worth?

The latest Internet dream was that social networks such as Facebook and MySpace, with all of their tons of user data, would create an advertising gold mine. But the answer, so far, is that despite the huge and growing amount of interest in social networks, your social friends are not worth that much. People are just not in a buying mood on social networks so they don’t click on those ads that often at all.

The good news is that that social networks are coming to grips with this hard realization and developing new ways to make money from all those friends–beyond advertising. The recent $200 million investment that Facebook received from Russian investment firm, Digital Sky Technologies, which says it has developed several profitable social networks, was driven in some part by the company’s expertise in generating non-advertising revenue.

Check out the rest of this post on BusinessWeek’s TechBeat blog, in which I talk about the new emerging business models of social media.

From Russia with Love: Facebook Lands $200 Million From Russian Investors

Here’s the top of my BusinessWeek story about Facebook’s big new financing round based on brief yet exclusive interviews with Facebook CEO Mark Zuckerberg and investor-of-the-moment, Russia’s Yuri Milner.

From Russia With Love: Facebook Lands $200 Million
The social networking site will tap Digital Sky Technologies for expansion funds in a deal valuing Facebook at $10 billion. Still no public issue

Ending months of fevered speculation over whether it would raise more money, social network Facebook said on May 26 that it will take a $200 million investment from Russia’s Digital Sky Technologies.

In return, DST is getting preferred stock worth 1.96% of Facebook, valuing the social network at $10 billion. This is the first time Facebook has raised major equity funding since late 2007, when Microsoft (MSFT) invested $240 million in exchange for a 1.6% stake that valued the site at $15 billion.

In a move that will help Facebook employees unlock some of the value of their shares before the company goes public or is sold, DST will purchase at least $100 million of Facebook common stock from current or former Facebook employees. DST co-founder Yuri Milner tells BusinessWeek that the agreement to buy common stock was not a precondition of the equity investment. “These are two separate transactions,” Milner says in an interview. DST and Facebook say they will release details of the plan this summer.

Read the rest of the story here.

Need Money for Your Startup? Meet the Super-Angels

Need money for your startup? Then you should read my new feature, “These Angels Go Where Others Fear to Tread,” in this week’s issue of BusinessWeek.

The story is about a new and increasingly prominent class of investors, which I call super-angels, who are financing startups as big-name venture capital firms conserve their cash. Over the last few years, these firms have funded hundreds of startups, including top outfits such as Facebook, Digg and Twitter.

My story focuses on First Round Capital and its co-founder Josh Kopelman. But there are a growing number of these firms, including Baseline Ventures, Soft Tech VC, Maples Investments, Felicis Ventures, True Ventures, and others.

[Risk-takers: First Round’s partners Howard Morgan, Chris Fralic, and Rob Hayes]

Since there seems to be more super-angels popping up every week, I am going to start a sort of wiki list of the firms, which I hope you all will add names to. Check out the story here.

I also sat down with BusinessWeek assistant managing editor Jim Elllis for an interview about the story in our new weekly video podcast. Check it out here.

It’s Official: Owen Van Natta Named MySpace CEO

Notice how Jonathan Miller stressed that Van Natta will “guide MySpace through its next phase of growth.”

Seems to jive with previous post suggesting that MySpace may be shifting its strategy to emphasize growth over profit.

Here’s the release:

News Corporation Names Owen Van Natta Chief Executive Officer of MySpace
______________________

Los Angeles, CA, April 24, 2009 – News Corporation today announced the appointment of Owen Van Natta to the role of MySpace Chief Executive Officer effective immediately. Mr. Van Natta will be based in Los Angeles and report directly to Jonathan Miller, News Corporation’s CEO of Digital Media and Chief Digital Officer.

A highly-regarded digital executive, Mr. Van Natta, 39, previously served as Chief Revenue Officer and Vice President of Operations for Facebook, where he helped negotiate Facebook’s $240 million investment from Microsoft. Earlier, he served as Vice President of Worldwide Business and Corporate Development for Amazon.com. Most recently, he was the CEO of Playlist, Inc., an online music company.

“Owen combines a deep understanding of social networking, a keen business sense and the operational experience to guide MySpace through its next phase of growth. I’m confident his leadership will be an invaluable asset,” said Mr. Miller. “I plan to work closely with Owen to shape our long-term vision around this vibrant community that already attracts more than 130 million users worldwide.”

“I’m thrilled to have the privilege to pilot MySpace in what is sure to be an incredibly exciting and rewarding next chapter for the business,” said Mr. Van Natta. “I feel honored to build upon the immeasurable achievements of the MySpace founders and look forward to working with Jon and the MySpace team to meet the challenges and make the most of the opportunities before us.”

While serving as Vice President of Operations and Chief Revenue Officer for Facebook, Van Natta focused on revenue operations, business development, strategic partnerships and technical operations. As Vice President of Worldwide Business and Corporate Development at Amazon.com, he managed global marketing programs and strategic partnerships. He was also part of the founding team of A9.com, the Amazon.com search company, and was responsible for site operations and sponsored-link advertising. Owen earned a B.A. from the University of California at Santa Cruz.

Sheryl Sandberg on Facebook’s Future

On Tuesday night, BusinessWeek editor in chief Stephen J. Adler sat down with Facebook Chief Operating Officer Sheryl Sandberg for an exclusive interview. Adler talked with Sandberg about the company’s financial prospects, recent controversies over its redesign and terms-of-service changes, Sandberg’s high school years, and other issues. Edited excerpts follow:

On the questions about Facebook’s business strategy:

It’s a really simple answer, which is that our business is advertising. We’re not waiting to find our business. We found it, and it’s actually working very well. Marketers all over the world have to sell products and services, and they have to generate demand for those services. They do that typically where people are spending their time. But there is a real imbalance right now: Between something like 28% to 29% of people’s time is spent online, but only 8% to 10% of the dollars are spent online. So there is this migration of ad dollars from other places going online.

Then the question is how do advertisers make that useful? What we do is we enable connections. We enable people to connect with users and provide advertising in such a way that it’s not obtrusive at all, but it’s part of the advertising experience and part of the user experience. And so we’re doing really well financially.

We’ve actually just confirmed that we expect to grow revenue 70% year-over-year in this year, obviously a very tough economic environment. We’ve been profitable on an [earnings before interest, taxes, depreciation, and amortization] basis for five consecutive quarters, and that’s ongoing. We’re on a very clear path to cash-flow profitability. So we have a business model, and our ad business is working, and working quite well.

Check out the rest of the interview here, along with some video snippets.

Facebook’s CFO Exits: Enter, the Questions

Last night, I updated my Tech Beat blog post and wrote a full-fledged story for the BW.com on Gideon Yu’s departure from Facebook. I still haven’t gotten to the bottom of this surprising ouster but I will continue to look into this over the coming days and weeks.

However, I am glad that I got my scoop out last week reporting that Facebook was having trouble raising money. I didn’t realize it at the time but I was probably very close to breaking open the story on Yu’s departure. In retrospect, I think I fired a warning shot about the company’s growing problems and internal tensions.

Since Facebook has not been forthcoming about Yu’s departure, the company is going to be on the hot seat until the truth is revealed. In a statement, Facebook said it is looking for a new CFO with “public company experience.” While it is true that Yu has never taken a company public before, he does have significant experience working in a senior finance role at a public company, having worked at Yahoo! as senior vice president and treasurer for about four and a half years.

Speaking of which: Does anyone find it strange that the New York Times, Fortune and Wall Street Journal all are burying this story? Fortune ran a glowing cover about Facebook recently, while the New York Times just published a mostly complimentary long feature about the company in its Sunday Business section that skimped over most of its business challenges. Yet in today’s papers and online version of Fortune, Yu’s ouster did not even merit a story!

You’d think the Journal would have run the story in a big way since they got the scoop on Yu’s departure. What does this say about Facebook? Has it jumped the shark?

My own take: The ouster of Yu marks a turning point in the media and investment community’s perception of Facebook. Turmoil seems to be the default mode for this fast-growing phenom now. The honeymoon is officially over. I don’t expect to see any more glowing features in major publications until the company proves it can create a sustainable and profitable business.

Here’s the top of my piece:

Facebook’s CFO Exits: Enter, the Questions
Gideon Yu, the latest top executive to leave the social network, will be tough to replace just as the fast-growing company needs to raise cash

By Spencer E. Ante

Facebook is replacing its chief financial officer, Gideon Yu.

Facebook spokesman Larry Yu confirmed to BusinessWeek that CFO Yu will be leaving the company. Now the big questions are: Why is he out? And who will replace him?

In a statement, Facebook said the company “will be looking for someone with public company experience” and that the fast-growing social network has retained recruiter Spencer Stuart to lead the search for a new CFO.

“Gideon has played an important role in helping us achieve our financial success, building a strong finance team, and establishing the core financial operations of our company,” said Facebook in its statement. “We are grateful to Gideon for his contributions to Facebook and what we are trying to accomplish. Despite the poor economic climate, we are pleased that our financial performance is strong and we are well positioned for the next stage of our growth.”

“NO CURRENT PLANS TO GO PUBLIC”
Facebook’s statement that it is looking for a CFO with more experience in running the financial operations of a public company has led to speculation that the company would accelerate its plans to sell shares in a public offering. But in another statement released to BusinessWeek, spokesman Yu said the company had “no current plans to go public.”

“There are numerous benefits to operating as a private company, especially in this difficult economic environment,” said Yu. “But we’ve always considered the possibility of becoming a public company at some point.”

That raises a further question: If Facebook did not need to hire a new CFO to take the company public in the near term, why is Yu leaving now?

FACEBOOK’S SINKING VALUATION
One reason may have to do with Facebook’s finances. Yu’s departure comes as he was in the process of trying to raise money for the fast-growing startup—one of his primary responsibilities as CFO. Over the last few months, Facebook has been trying to raise as much as $100 million in debt financing to pay for rising technology costs. Although Yu has played an instrumental role in helping Facebook secure more than $500 million in debt and equity financing in the past, he was unable to line up any significant amount of money in the latest round of financing.
Read the rest of the story here.

It’s Official: Twitter Hires Ex-Google Designer Douglas Bowman

Turns out the Web rumors were true for once. In a meeting last Friday afternoon in Twitter’s San Francisco office, Twitter co-founder Biz Stone told me that the company had hired ex-Google Visual Design Lead Douglas Bowman to be the company’s new creative director.

Bowman will replace Stone, who was acting as Twitter’s creative director. “The Twitter Web page looks pretty simple,” says Stone. “But from our perspective the design needs a lot of work.”

This is a great hire for Twitter, and more proof that Twitter has replaced Facebook as the tech industry’s hottest startup. Bowman probably could have joined Facebook if he wanted. But the talented designer, who used to work at Wired News, clearly sees a bigger opportunity at Twitter, not only from a design perspective but perhaps from a monetary one as well.

Bowman will be a much-needed presence as Twitter expands and tries to handle the enormous design challenge of helping Twitter users to manage the increasingly large amount of information flowing through the Twittersphere.

Bowman caused a bit of a stir when he announced his departure from Google in late March. In a candid post on the blog of his design consultancy stopdesign, Bowman said he left Google because of what he described as the company’s slavish obsession with data.

“I had a recent debate over whether a border should be 3, 4 or 5 pixels wide, and was asked to prove my case,” wrote Bowman. “I can’t operate in an environment like that. I’ve grown tired of debating such minuscule design decisions. There are more exciting design problems in this world to tackle.”

Not surprisingly, it appears as if Bowman digs Twitter. He seems to have joined the service on or around March in 2007. His first tweet appears to have been posted from, what else, South by SouthWest. “mellowing at the Driskill,” wrote Bowman. “my lord there’s a lot of people at sxsw this year.”

But Bowman is far from prolific or Scobel-like. He only has published 401 tweets over the last two years. Apparently, Bowman has to work for a living.

He is pretty popular, though. Bowman currently has 3,677 followers yet he himself only follows 93 people. Among the select crew of people that Bowman tracks are: San Francisco Mayor Gavin Newsom, Biz Stone, Tina Fey, designer Derek Powazek, Google senior vice president Jeff Huber and blogger Anil Dash.