This morning at Facebook headquarters, investment firm Kleiner Perkins Caulfield & Byers joined with Facebook, Amazon.com, and Zynga to announce a new $250 million fund for social networking startups. The fund, sFund, will be focused on companies that build social networking functionality in from the get-go, rather than companies that try and “bolt on” social networking after the fact.
The event itself was mostly a cheerleading session for the greatness of social networking, but the size of the bet is pretty significant, and suggests that social networking is going to be the hot area of investment for the next few years.
Kleiner’s John Doerr and Bing Gordon were joined by Facebook CEO Mark Zuckerberg, who had some interesting comments about advertising and monetization models, Amazon CEO Jeff Bezos and Zynga CEO Mark Pincus.
Update: The first startup that sFund invested in is called CafeBots (not CafeBox as I misheard). It’s founded by four Stanford Ph.Ds and calls itself “the first company dedicated to Friend Relationship Management,” whatever that means. They got an initial financing round of $5 million.
Notes from our coverage of the event start below:
11:28: Pincus notes that there used to be an inverse relationship between engagement and monetization. With Google, the faster you finish your search and move on, the more money Google makes. With social, it’s going to be the opposite. New depth of engagement, line up with monetization model.
11:27: Zuckerberg is talking again about monetization models. There will be many of them. Social versions of apps will be very disruptive in a lot of industries to existing apps. Lots of ways to monetise–ads, credits, one-time payments, subscriptions. All can work. Depends on the industry. What we’re sure about is that social versions of apps will deliver more value, and will therefore make more money than their predecessors.
11:26: Bezos was asked about an Amazon app store and predictably deferred.
11:25: Question about customer service. Bezos says when you start charging for things, people have an expectation they should have excellent customer service.
11:24: Zuckerberg continues to say that we’ve got a wrong assumption that we can’t offer enough value for consumers to pay, and has to be ad-supported or e-commerce that they would have bought online. There are a lot of newly created valuable digital-only services and products that will be much bigger in 10 years than advertising.
11:23: Question: monetization models. Zuckerberg says he’s the wrong person to ask. “I personally believe we’re massively under-invested across the board in what I call the user-pay economy.”
11:22: Question: who are you investing in today? Doerr: CafeBots today. The others I named would have been in the sFund if we’d started it. Instead they’re Kleiner Perkins investees.
11:20: Question: ensuring social responsibility? Doerr: we don’t control these companies, but we agree that users ought to own their own data. Great challenge going forward.
11:19: Question: more partners coming? Bing Gordon: we hope so. (Like he was really going to be able to answer this.)
11:18: Question: what’s the difference between social or not social? Bing Gordon: “You’ll either have lots of friends or none.” Devs who “slap on” social functionality won’t thrive.
11:18: What took you so long to do this? Zynga showed the way.
11:17: Now we’re in Q&A.
11:14: Amazon is just now announcing a new free tier for AWS, for developers who want to try it out for a year.
11:14: Bezos: giving some stats for AWS–197,000 transactions per second seems most impressive. (“Don’t try this at home.”)
11:12: There’s a wave of companies so far who’ve built some light social layers on top. But what makes these best apps work, like Zynga with gaming or what Facebook’s done with groups, is when social is fundamentally built in. Two types of companies: social added on, or ground-up from social. The latter will have a “very fundamental advantage….The world will look a lot like Zynga.”
11:10: Zuckerberg: lot of people building social apps just now will be at scale in five years. Need specialised DNA–we couldn’t make games, need someone like Zynga. We provide social fabric from its inception. That’ll be true for a lot of areas. Music, movies. E-commerce–we’re not going to build warehouses. Could deliver excellent social e-commerce product. A lot of those things are just starting now. It is going to take a few years to reach 100s of millions of users.
11:09: Pincus: In five years, these services will be like dial tones. Facebook is the social one. Pandora is my musical dial tone. Amazon will be my shopping dial tone. (By dial tone, he means seamless user experience.)
11:09: Pincus: my kids are only 12 weeks old, so have some time before they’re on Facebook hopefully.
11:08: Look ahead five years, what do you see? Gordon: most exciting part of your social graph is when your family posts something. “When they post something and haven’t blocked me, it’s a day maker.”
11:07: Liberty Media, Allen and Company participating as well.
11:05: Gordon: to parents, history begins when your kids are born, and the history of media began when the Facebook platform was born.
11:04: Entrepreneur Bing Gordon, leading this sFund.
11:03: Bezos giving advice to startup founders. Pick something you’re interested in. Today, he’d be interested in genetic engineering, synthetic life…going way off topic now.
11:02: Pincus: “there’s no way we could have scaled FarmVille if we hadn’t been on AWS (Amazon Web Services).” Bezos amazed by Zynga’s growth. “Rich nutrient solution of people who are connected already.” Can layer on other things.
11:01: Bezos starts with a plug for Amazon Web Services (Amazon’s cloud-computing platform, often used by startups for Web hosting and data storage). “I hope that most of that $250 million will be spent on Amazon Web Services.”
11:00: Pincus: Bezos says easiest way to learn to be CEO at scale is to hire people who were there. Added people like Owen Van Natta (Facebook and Amazon alum).
10:59: Pincus: biggest challenge has been learning to be a CEO at scale. What’s helped me most is seeking out coaches and advisors and mentors. Person I’ve looked to most for CEO advice has been Jeff Bezos. “CEO moments.”
10:57: Pincus: one example that would have been a great sFund company: Membase. Open source database management system for storing back-end data behind Web apps.
10:56: Pincus says personalised travel is a huge opportunity. Why isn’t there a site that knows I’m at the airport, knows the status of my flight, and can recommend a great game in the meantime. (Laughs.)
10:55: Zynga’s Pincus says that the idea of logging in to a personalised site is the new thing.
10:54: Now to Zynga. “The fastest growing company we’ve ever invested in,” says Doerr.
10:53: Zuckerberg: best path for building social products isn’t to build them ourselves but to build a platform on which others can build applications.
10:52: Zuckerberg is talking about the increasing importance of social networking. Doerr asks what he’d do if he were starting a company today, and he said he’s focusing on communications.
10:49:The big announcement: a new $250 million fund for social networks.
10:47: Lockerz is the fourth one. Aims to be the home page for under 30s. Develop, earn, trade incentives. Announcing their social services today.
10:45. Doerr’s talking about the three waves of technology. Microprocessors in the 1980s, the Web in the 1990s, and the social Web today.
10:43 PT: John Doerr is introducing Mark Zuckerberg, Jeff Bezos, and Zynga CEO Mark Pincus.