How Facebook spam works. Facebook just won a $711 million lawsuit against an email marketer who had operated a spam scam on the social network. But scams are still endemic on the social network, according to a guest post on TechCrunch. "The underlying premise of all the advertising techniques we've discussed so far is that trickery is profitable," writes Dennis Yu, CEO of BlitzLocal. "Fool them into thinking the new friend request is from Facebook, lie to them that the miracle skin creme is actually free, tell them they'll earn points if they just click this button-which then puts their email address on a list that's resold to the top spammers in the world." The post is a great read if you're interested in the dark side of online advertising, and it contains an interesting prediction about Facebook." I honestly believe from my meetings at Facebook, that they've all drunk the Zucker-koolaid and are putting the user experience ahead of earnings," Yu writes. "That's why, if you're a UK resident, you're not seeing those sexy Russian dating ads from a couple months ago-but man, were those profitable."
Starting your own (profitable) category. "If you can't be the first in a category, set up a new category you can be the first in." So say the authors of The 22 Immutable Laws of Marketing. Entrepreneurs like Gary Vaynerchuk and Tim Ferriss are certainly evidence that you can build a brand the around a unique personality or passion. But where do you start? Web Worker Daily outlines five steps to building your own category, including abandoning the idea of appealing to everyone, being laser-focused and building the framework to support your individual voice.
Federal agencies try the cash-for-innovation model. In the past, businesses have often taken the lead in advertising high-profile competitions that were accompanied by sizable cash prizes in order to spark inventors' interest in developing new technologies. These days, however, it has become the norm for federal agencies to also use contests to inspire innovative inventors by offering financial rewards. As reported by the Boston Globe, the Department of Defense has used these types of contests to hasten the design of military robots that soldiers can carry during combat, and NASA has also awarded more than $2 million since 2006 through its Centennial Challenges program to innovators who have designed space-faring robots. According to Andy Petro, manager of the NASA prize program, "We're not paying for ideas; we're only making awards when an idea has been translated into practical reality."
Small business lender files for bankruptcy. The will it, won't it, drama surrounding commercial lender CIT Group came to an end yesterday when the 101-year-old lender said it was entering a "prepackaged" reorganization plan through bankruptcy court, The New York Times reports. The company said it expects to emerge from the proceedings before year's end. CIT is one of the nation's biggest players in the "factoring" industry, whereby "suppliers and manufacturers sell payments owed for goods and services to companies such as CIT because they need immediate cash," Bloomberg explains. With an estimated 70 percent of the factoring market, CIT is a huge lender to the retail industry, including thousands of small and mid-sized businesses. "Short term, it's going to cause some difficulties for startups and smaller borrowers," Jean Everett, a partner at Hiscock & Barclay LLP, told Bloomberg. The big losers on the deal? Likely the taxpayers, who are expected to lose most, if not all, of their $2.3 billion bailout investment in CIT.
The balancing act with virtual goodsAs we've noted before, virtual goods are flourishing, but it can be a tight rope act for companies to get revenue from players of their virtual games without scaring them off. Companies need to employ both economists who help find the perfect price for the goods, and creative types who ensure that the virtual games and social networks stay engaging and competitive. Virtual goods are estimated to be and $1 billion business in the U.S. according to the San Francisco Chronicle but usually only 5 to 10 percent of users help the companies pull in money. Plus, there's always the danger that a newer, cooler game will drag players away. But despite the risks, the industry is expected to remain lucrative. Charles Hudson, founder of the Virtual Goods Summit which was held last week in San Francisco says, "People are going to keep spending money on virtual goods because they're spending time in these places, building relationships and engaging content. It's just like another hobby."
Amazon and Zappos make it official. And the price is $1.2 billion. The acquisition was announced several months ago, but the deal has received government approval, and it closed over the weekend. (In the interim, the total size of the deal went up by $300 million, thanks to a jump in Amazon's stock price.) CEO Tony Hsieh writes, "I'm excited because Amazon supports us in continuing to grow our vision as an independent entity, under the Zappos brand and with our unique culture." (For more on how Zappos grew itself into a billion dollar company, check out our May cover story.)
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