eBay Helps Finance Businesses in the World's Poorest Countries

EBay has launched MicroPlace, a global microfinance site that provides loans to businesses in some of the world's poorest countries. It is similar to the Kiva.org service that has been operating for the last 2 years, which has already providing more than US$13 million in funding. MicroPlace and Kiva are noble initiatives that hopefully will be replicated by other businesses and entrepreneurs who are looking to give back to the global community. It'd be fantastic to see these companies really take off and do well.

New eBay site lets people finance the world's poor

By Jonathan Stempel, 25 October 2007, Reuters
(Additional reporting by Eric Auchard in San Francisco)

EBay, the world's largest online auctioneer and payments company, launched on Wednesday a Web site allowing ordinary investors to buy securities aimed at improving conditions in the world's poorest countries.

MicroPlace will allow people to invest as little as US$100 to support development in impoverished areas.

So-called microfinance is the supply of loans, savings, insurance and other basic financial services to low-income households and businesses, typically without collateral. It is often conducted in emerging economies, where people cannot typically obtain bank loans.

Microfinance is at work in more than 100 countries, and is generally provided by financial institutions or wealthier investors. It gained wider renown last October when Bangladeshi economist Muhammad Yunus, who pioneered it in 1976, and the Grameen Bank he founded won the Nobel Peace Prize.

"Capital markets are just waking up to this asset class," Tracey Pettengill Turner, the founder and general manager of MicroPlace, said in an interview. "This is different because it is the first Web-based service for the everyday investor to invest in microfinance, and earn an investment return while addressing global poverty."

Turner said she has worked in Bangladesh, and worked at Grameen in 1998 after graduating from Stanford Business School. She said she sold MicroPlace to eBay in June 2006.

Another microfinance site, Kiva.org, said last week it has built a $13 million loan portfolio in its first two years to help about 20,000 entrepreneurs. Other sites include Finca International's http://www.villagebanking.org and Accion International's http://www.accion.org.

TRACK RECORDS

MicroPlace chose the Calvert Social Investment Foundation to offer its first 10 securities, where funds are designated for such countries as Cambodia, Ecuador, Ghana and Tajikistan.

The securities mature in two to four years and, despite lacking credit ratings, yield just 1.5 percent to 3 percent a year. That's below the 3.8 percent yield on similar maturity U.S. Treasuries, which have essentially no credit risk.

Turner said issuers "generally have very good track records, often with 10 years in investing in microfinance with no history of defaults." She added that the issuers often set aside reserves to limit potential credit risk.

Investments may be made through eBay's PayPal service, or a regular bank checking account, and investors are assessed no fees, commissions or expenses. Prospectuses are available online, and MicroPlace is regulated as a brokerage by the Financial Industry Regulatory Authority.

Turner said MicroPlace makes money from charging issuers to list. "We aspire to break-even, and if and when we reach profitability, eBay intends to reinvest any profits back into its own social initiatives," she said.

Catherine England, a spokeswoman for San Jose, California-based eBay, said the program will be "not material" to results at the online auctioneer and payments company.

Microsoft Buys 1.6% of Facebook

Microsoft has pulled out its rather large wallet and given Facebook US$240 million for a 1.6% stake in the business. This would seem a sound move as a competitor blocking strategy and potentially to integrate Live Search into Facebook (similar to the $1 billion + deal Google has with MySpace). However, two considerations also come to mind: will this see a merger of MSN's content, Hotmail and IM properties into Facebook? And if not, did Microsoft pay too much? Only time will tell.

Microsoft trumps Google to snare Facebook stake

The Sydney Morning Herald, October 25, 2007

Microsoft will take a $US240 million ($267.66 million) stake in the wildly popular social-networking website Facebook as part of an expansion of the strategic alliance of the two firms, the companies said on Wednesday.

The deal to buy a 1.6 per cent stake values Facebook at $US15 billion ($16.8 billion).

Today's news comes less than four years after Mark Zuckerberg started the online social networking site in his Harvard University dorm room.

Besides validating Zuckerberg's decision to rebuff a $US1 billion takeover offer from Yahoo last year, Microsoft's money should be more than enough to pay for Facebook's ambitious expansion plans until the privately held company goes public.

Zuckerberg, 23, has indicated he would like to hold off on an initial public offering for at least two more years. In the meantime, Facebook hopes to become an advertising magnet by substantially increasing its current audience of nearly 50 million active users, who connect with friends on the site through messaging, photo-sharing and other tools.

The deal means Microsoft will become the exclusive third-party advertising partner for Facebook, and will begin to sell advertising for Facebook internationally in addition to the United States, the companies said.

"We are pleased to take our Microsoft partnership to the next level," said Owen Van Natta, vice-president of operations and chief revenue officer at Facebook.

"We think this expanded relationship will allow Facebook to continue to innovate and grow as a technology leader and major player in social computing, as well as bring relevant advertising to the more than 49 million active users of Facebook."

Reports said the deal came after fierce competition between Microsoft and Google.

The Facebook investment represents a coup for Microsoft because it provides the world's largest software maker with a toehold on one of the internet's hottest platforms and a potentially lucrative forum for selling online ads.

With the Facebook investment, Microsoft dealt a rare setback to Google, which had previously trumped its bitter rival in earlier bidding battles involving AOL and internet ad service DoubleClick.

Although News Corp's MySpace.com remains the largest social network, Facebook has been growing at a far more rapid clip during the past year.

Facebook attracted 30.6 million US visitors during September compared with 68.4 million at MySpace.

In September, Facebook was the 6th most visited property worldwide with 73.5 million unique visitors (aged 15 and over), and the 5th most highly trafficked property worldwide with 34.5 billion page views, according to ratings agency comScore.

The agency said Microsoft's social networking equivalent - called "Windows Live Spaces" - attracted an audience of 9.8 million.

MySpace follows Facebook in Becoming an Application Platform

In a long-awaited move, MySpace has followed in the footsteps of rapidly growing rival Facebook in offering a "platform" that application developers can build upon. Despite have millions of more users, MySpace has struggled in 2007 to match the pace of growth and hype that Facebook has generated. It will be interesting to see what quality of applications are developed for the MySpace platform - will we see more of the silly (but popular) applications Facebook is known for or more serious consumer and business applications? My expectation is that with the power and resources of News Limited/Fox Interactive Media behind MySpace, a number of high-quality "seed" applications will be produced to get them ahead of Facebook.

MySpace makes move on Facebook

Michele Gershberg and Eric Auchard in San Francisco, October 19, 2007, Australian IT

NEWS Corp's MySpace, the world's largest online social network, said it will allow outside developers further access to its service to counter the growth of smaller rival Facebook.

News Corp chairman Rupert Murdoch joined MySpace chief executive Chris DeWolfe to make the announcement before Silicon Valley's internet elite and answer questions about the media conglomerate's digital future.

"We are opening our platform in the next couple of months," Mr DeWolfe said, confirming months of speculation that MySpace would follow in the footsteps of Facebook, which emerged as a serious competitor after allowing software developers to create applications for its users.

At the same time Murdoch signalled lower expectations for MySpace revenue in the company's 2008 fiscal year ending in June, suggesting it may not reach a previous forecast of over $US800 million ($893 million).

"I might say $US750 (million) but it's at least 30 times what it was the day we bought it two years ago," Mr Murdoch said at the web 2.0 Summit in San Francisco. "If we keep that trajectory going like that we'll be very happy."

Mr Murdoch's acquisition of MySpace for $US580 million in 2005 crowned him as the smartest media executive at the time, once rivals realized the potential of its growing base of users for promotions and advertising.

But privately held Facebook has surged to a strong second place in the social network world since it opened its site a year ago beyond an original base of college students and started allowing in May independent software makers to build applications for users and profit from it.

"There's been so much excitement, energy and growth on the part of Facebook," said Forrester analyst Charlene Li. "There's a lot of pressure on MySpace to capture that energy."

While MySpace remains the leader with nearly 110 million users, Facebook's rapid growth to over 47 million members has made it a new media darling, with media reports pegging its potential value to investors as high as $US15 billion.

"I would say we're different (than Facebook) and in spite of all the hype we seem to be growing faster," Mr Murdoch said.

Asked what he thought of such a valuation, Mr Murdoch added: "What it really does is it tells you that News Corp is totally underpriced."

News Corp is the publisher of The Australian.

For four years MySpace has allowed users to embed features from other websites by pasting bits of code on their MySpace pages. But Facebook's open call to developers has already attracted 6,000 independent applications to its site.

"YouTube, for one, basically generated all their early traffic on MySpace," Mr DeWolfe said of the company's traditional willingness to let other web companies build businesses on MySpace. YouTube is the online video unit of Google.

Mr DeWolfe said he was seeking to create a far more lucrative environment for outside developers on MySpace than currently exists on Facebook, where so far advertising opportunities for independent application developers are limited.

"The idea will be to allow outside developers to tightly integrate their applications into MySpace," Mr DeWolfe told Reuters following his on-stage appearance.

Software programmers will be able to control key aspects of how features like photos or user authentication work, allowing them to build more complex web services than the restrictive approach MySpace has employed to date with outsiders.

Importantly, the company plans to give developers control over advertising that runs on the web pages they create to host new services on MySpace. "There is going to be paid revenue opportunities for all the developers," Mr DeWolfe said.

MySpace also plans to take steps to protect its users from potential security problems or overload created by a sudden flood of new applications. It is setting up a "sandbox" version of the site for 2 million users who elect to get early access to new applications while they are still in test mode.

Mr DeWolfe also said he and MySpace co-founder Tom Anderson have signed up for an additional two-year contract. He did not disclose financial terms.

MySpace had already taken steps to bulk up its presence and showcase its technology expertise, opening an office in San Francisco this week with about 50 employees and plans to expand its team to about 200 people within the next year.

Dotcom Bust 2.0?

For those of us who went through the pain of the first dotcom bust around the start of the millenium this will all seem familiar - huge valuations on companies that are just not making money.

Dot-com fever stirs sense of déjà vu

By Brad Stone and Matt Richtel, International Herald Tribune
Published: October 16, 2007

SAN FRANCISCO: Silicon Valley's math is getting fuzzy again.

Internet companies with funny names, little revenue and few customers are commanding high prices. And investors, having seemingly forgotten the pain of the first dot-com bust, are displaying symptoms of the disorder known as irrational exuberance.

Consider Facebook, the popular but financially unproven social networking site, which is reportedly being valued by investors at up to $15 billion. That is nearly half the value of Yahoo, a company with 38 times as many employees and, based on estimates of Facebook's income, 32 times more revenue. Google, which recently surged past $600 a share, is now worth more than IBM, a company with eight times more revenue.

More broadly, Internet start-ups are drawing investment based on their ability to build an audience, not bring in revenue - the very alchemy that many say led to the inflating and undoing of the dot-com bubble.

The surge in the perceived value of some start-ups has even surprised some entrepreneurs who are benefiting from it. A year ago, Yahoo invested in Right Media, a New York company developing an online advertising network. Yahoo's investment valued the company at $200 million. Six months later, when Yahoo acquired Right Media outright, the purchase price had swelled to $850 million.

What changed? According to Right Media's co-founder Brian O'Kelley, very little, except for the fact that Microsoft and Google were writing billion-dollar checks to buy online advertising networks, and Yahoo felt that it needed to pay any price to keep up.

"I have to say I giggled," O'Kelley, 30, said of Yahoo's acquisition, which earned him $25 million. "There is no way we quadrupled the value of the company in six months."

The trend is described as a return to madness by skeptics or as a rational approach to unlimited opportunities presented by the Internet by true believers. Greed, fear and a desperate rush to pick the next big winner are all adding fuel to the fire that is Silicon Valley's boom. "There's definitely a lot of betting going on, and it's not rational," said Tim O'Reilly, a technology conference promoter and book publisher.

O'Reilly, who is credited with coining the phrase "Web 2.0," said he thought that Silicon Valley was creating a new set of society-altering tools. But that has not stopped him from worrying that the industry is now minting too many copycat companies, half-baked business plans and overpriced buyouts.

When the bubble inevitably pops, he said, "there are going to be a lot of people out of work again."

Putting a value on start-ups has always been a mix of science and speculation. But as happened in the first dot-com boom and the recent surge in housing, seasoned financial professionals are seemingly indulging in some strange instinct to turn away from the science and lean instead on the speculation.

This time around, people indulging in that optimistic thinking are not mom-and-pop investors or day-traders but venture capitalists whose coffers are overflowing with money from university endowments and hedge funds. Many of those financial professionals say everything is different this time.

More than 1.3 billion people around the world now use the Internet, many with speedy broadband connections and a willingness to immerse themselves in digital culture. The flood of advertising dollars to the Web has become an indomitable trend and a proven way for these new start-ups to make money, while the revenue models of the dot-coms of yesteryear were often little more than sleight of hand.

"The environmental factors are much different than they were eight years ago," said Roelof Botha, a partner at Sequoia Capital and an early backer of YouTube. "The cost of doing business has declined dramatically, and traditional media companies have also woken up to the opportunities of the Web. That does open up the aperture for a different outcome this time."

Some trace the start of the new bubble to eBay's $3.1 billion acquisition of the Internet telephone startup Skype in 2005. EBay's chief executive, Meg Whitman, reportedly outbid Google for the company. EBay acknowledged this month that it had overpaid for Skype by about $1.43 billion, and Niklas Zennstrom, a Skype co-founder, left the company.

Google's acquisition of YouTube last year for $1.65 billion, under similarly competitive bidding, may have accelerated the transition to loftier values. Google executives and many analysts argued that YouTube was well worth the price tag if it became the next entertainment juggernaut.

It still might. Over 205 million people visit YouTube each month, according to the research firm ComScore. Still, Citigroup recently estimated that YouTube would bring in $135 million in revenue in 2008. At that rate, the number of videos watched on the site would have to grow 1,642 percent before YouTube accounts for just 5 percent of Google's revenue.

"We are almost going back to year 2000-types of errors," said Aaron Kessler of Piper Jaffray. Internet companies, he added, "are buying users instead of revenue and profitability."

The Skype and YouTube windfalls helped to give the newest batch of Internet entrepreneurs their dreams of improbable wealth. They also brought back practices that were seemingly discredited during the first boom. For example, in the first dot-com gold rush, Internet companies did not have to demonstrate to investors that they could make money. Now that once again appears to be true.

Twitter, a San Francisco company that lets users alert friends to what they are doing at any given moment over their mobile phones, recently raised an undisclosed amount of financing. The company is not focused on making money and no one in the company is even working on how to do so, said its co-founder and creative director, Biz Stone.

"At the moment, we're focused on growing our network and our user experience," Stone said. "When you have a lot of traffic, there's always a clear business model."

That is not necessarily illogical in the current climate. A European competitor, Jaiku, also devoid of income, was bought last week by Google for an undisclosed sum. With the competitive logic that prevails at the major Internet companies, the deal may have further raised Twitter's appeal to Google's rivals.

The high value placed on many startups and minimal requirements for financial performance are raising expectations of other entrepreneurs. Sharon Wienbar, managing director of Scale Ventures Partners, an investment firm, cited the $100 million valuation that investors recently gave to the Internet genealogy site Geni.com, founded last year in Los Angeles by a veteran of PayPal. "Now every entrepreneur thinks he should get that," Wienbar said. "I have a feeling a lot of entrepreneurs are secretly meeting for beers on the Peninsula, saying, 'Hey, look what I got."'

O'Kelley, the Right Media co-founder, said other entrepreneurs had begun to think that the financing game was best played by avoiding actual revenue, since that only limits the imagination of investors. "It's a screwed-up incentive structure, just like you had in the first bubble," he said.

Another company benefiting from the exuberance is Ning, which allows users to create their own MySpace-style, ad-supported social networks. It was recently valued by investors at more than $200 million, mainly because its main backer and founder, Marc Andreessen, has a successful history with the Internet hits Netscape and Opsware.

Andreessen has argued on his blog that there is no bubble and that the high prices represent a rational desire to stake a claim in the potentially huge markets of the future. He also says companies that create mass-market hits always find ways to make money.

But he acknowledges that a seemingly inexhaustible flood of capital into Silicon Valley is helping to power the boom. Venture capitalists are flush with cash from institutional investors, eager for Internet-style returns on their money. That money has to go somewhere.

"The upward valuations pressure," Andreessen said, "is the result of decisions being made by people wearing suits in cities like New York and Boston who would never ever meet with start-ups. If that ever goes away, it will have consequences. But it doesn't look like they will change their minds."

Facebook Providing Start-up Funding for Application Developers

Here's a very interesting development from the Facebook team. Eager to drive smarter applications (YES, we're all very sick of Vampire and Pirate requests!) and of course revenue, Facebook are providing $10 million in almost no-strings-attached funding.

Facebook announces “fbFund” - grants for developers

Posted by Steve O'Hear, ZDnet.com

In a keynote conversation with Mike Arrington at the TechCrunch40 conference, Facebook founder and CEO Mark Zuckerberg announced that the company will be offering grants to budding Facebook platform developers, through its newly formed “fbFund”.

Administered and funded ($10 million) by VCs Accel Partners and The Founders Fund, grants of between $25,000-$250,000 will be open to anyone interested in creating a startup based on the Facebook Platform. The grants will not come with any conditions except that the grantee use the funds to build Facebook applications, and that Accel Partners and The Founders Fund will have first refusal in any future round of funding. In other words, this isn’t cash for equity, although one other condition apples: only individuals or companies who have not raised any formal venture funding, qualify.

Applications will be reviewed by the fbFund committee made up of Mark Zuckerberg, Facebook founder and CEO, and Chamath Palihapitiya, Facebook vice president of product marketing and operations. Facebook board members Jim Breyer (Accel Partners) and Peter Thiel (The Founders Fund) will also be part of the committee. Additionally, the fund will rely upon an advisory council that includes Reid Hoffman, founder and chairman of LinkedIn; Josh Koppelman, founder of First Round Capital; and Rajeev Motwani, professor of computer science at Stanford University and early advisor to Google.

Why is Facebook doing this?

In their words: “We are forming this fund to help grow the Facebook application ecosystem. By decreasing the barrier to start a company, we hope to entice an even larger group of people to become entrepreneurs and build a compelling business on Facebook Platform. We hope this is also a funding model that other venture capitalists will follow.”

So, as per all of Facebook’s recent strategy, it’s all about firming up the notion of Facebook as a platform. If developers and entrepreneurs can be enticed, with a little financial and advisory help, to develop for Facebook first, then Facebook’s business model will benefit. What interesting about the Facebook platform is that the barriers to entry are already pretty low, so a fairly no-stringed attached grant, even as little as $25,000, could go along way.

Picking up on the Facebook statement above, in which the company says that they “hope this is also a funding model that other venture capitalists will follow”, the newly formed fbFund certainly makes other venture capital that is aimed at Facebook developers, a little less attractive.

US Consumers Watching More TV Online

Here is a very interesting statistic from the US: 16% of households who use the Internet are watching TV shows online. Even more interesting, the key reason behind this growing trend is that people are wanting to avoid TV commercials. I'd suggest this is an opportunity for alternative content producers (i.e. not TV stations) to use the Internet to gain an audience or for existing broacasters to multicast via TV and online (and ideally wireless to mobile devices too).

Consumers Watching More TV Online

Personal Convenience and Avoiding Commercials Key
By R. Thomas Umstead -- Multichannel News, 10/15/2007 10:35:00 AM

Nearly 16% of American households who use the Internet watch television broadcasts online, according to a report released Monday by The Conference Board and TNS.

The Consumer Internet Barometer survey says more than three out of five online TV viewers cite personal convenience as the major reason for watching TV broadcasts online, while more than one-third choose online viewing in order to avoid watching television commercials. Other reasons sited include portability and a preference for computer viewing.

“Although online television viewing is still not a widespread phenomenon, the proportion of users has increased since 2006 and is likely to increase over tie, given consumers’ love for entertainment,” said Lynn Franco, director of The Conference Board Consumer Research Center.

Online users catching up on missed content have increased to 42% from 30% a year ago, according to the report, which is based on a third quarter survey of 10,000 households. Consumers viewing entire episodes on the Internet have doubled, and now approximately half watch their favorite shows online.

“One reason that personal convenience is the top reason for online viewing is that much of the same content available for television viewers is also available online,” Franco said.

The top methods for viewing broadcasts online are streaming and free downloading, according to the report. About two-thirds of viewers stream online content, while more than 40% download content for free.

“Over the next few years, the growing popularity of viewing TV episodes/shows online is going to have a huge impact on the way brands and advertisers communicate with viewers,” TNS executive vice president of technology, telecommunications and media Shari Morwood said in a statement. “If advertisers can effectively leverage the online video platform, we should see much more interactivity and emotional connections between brands and he online TV viewing audience.”

TV-Quality Internet Platform From Joost Is Another Headache for TV Stations Around the World

Here's another headache for TV stations around the world. With the launch of the Joost service (from the people behind Skype) there's now a TV-quality alternative that allows content creators to distribute their shows, films, music videos, etc. to a global audience. This is an opportunity for content creators (think US and UK broadcasters like Fox, BBC, etc.) to reach a broader audience but it doesn't bode well for TV stations around the world, whose business model is directly tied to broadcasting someone else's content...

TV-quality online network goes live

Audrey Stuart, Cannes, October 15, 2007

THE world's first TV-quality online television network went on display at last week's MIPCOM audiovisual trade show offering legal, free entertainment and raising questions about what this will mean for the massive TV business.
The network, Joost, launched this month just ahead of a clutch of competitors that include Italy's Babelgum, offers legal rather than pirated entertainment for free.

"The internet will start off showing traditional entertainment but eventually users and content creators will use the capabilities of the internet to create some amazing entertainment," said Mike Volpi, who heads up Joost.

Many mighty internet operators, such as AOL, MSN and Yahoo are investing heavily in making their own TV shows.

Media giant News Corp, publisher of The Australian, has spent a fortune buying into massively popular internet social networking site MySpace, and has launched MySpace TV, which will be available in over 12 countries.

And telecommunications companies around the world are investing in IPTV television packages packed with satellite TV shows, as well as video-on-demand that customers can watch on their sitting room TV sets, and pay for in their telephone bill.

The TV and digital media industries are right to be concerned, experts at MIPCOM said, as no one really knows how the current explosion of new ways to watch and interact with television will evolve.

But everyone remembers how the internet quickly changed everyone's lives.

Mr Volpi said over two million users had already downloaded the Joost application needed to use the fledgling TV service, which has been recording more than 100,000 downloads a day since it started on October 1.

But "it's early days," Mr Volpi cautioned, adding that the length of time users were staying on the channel varied enormously from region to region - though it was upwards of 20 minutes.

In the US, TV fans were opting for comedy and sci-fi, while in Latin America, and Brazil in particular, music videos were tops. Europeans were going for full-length feature films.

Mr Volpi said Joost aimed to remain a free service funded by advertisements and hoped to attract more creative, interactive ads.

As to content, he said users could look forward in the future to big-branded TV series as well as a vast library of older TV shows along with the mass of user-generated content on services like YouTube.

Joost would get a huge boost if Volpi succeeds in persuading major TV channels to put "fat belly" crowd-pulling shows such as "CSI" and "Survivor" and major sports events like major league baseball.

But that looked unlikely here, where the world's broadcasting heavyweights this week were busy explaining they were moving into the internet space themselves to increase and keep audiences.

BBC Worldwide digital media head Simon Danker said its popular motoring show "Top Gear" made a big hit on Yahoo Japan after it failed to get a spot for the show on Japanese television.

Leslie Moonves, chief executive of US broadcasting giant CBS, said his company is starting to create original programming for the web as well as exploring other opportunities.