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The social bubble

Rory Cellan-Jones | 13:43 UK time, Thursday, 24 March 2011

Back in 1999, it seemed anyone with a daft idea with dotcom attached to its name - say, boo.com - could walk into a venture capitalist's office and walk out with millions of dollars in funding.

Screenshot of Color

Now, in 2011, it seems the same is true - except that you need to utter three words, social, photos, and app.

Overnight yet another hot new smartphone application, Color, has been launched by a Silicon Valley startup. It's a new way of sharing photos online, based on your location.

That's not at all remarkable - from Instagram to Path, sharing pictures in all sorts of different ways is a hot area right now.

What's amazing is that the company behind Color has attracted investment of $41m from some of the biggest names in Silicon Valley's venture capital community.

Now you can build an app in your back bedroom for virtually nothing, so it's not exactly clear what all that money is for, except recruiting lots of staff and opening a big office.

To be fair, one reason that the likes of Sequoia and Baine have been so generous is the quality of the people involved in Color.

They include Bill Nguyen, who created the music-streaming service LaLa and sold it to Apple, and the former chief scientist at LinkedIn, the professional social network which just signed up its 100 millionth member. So people with a track record of turning good ideas into valuable businesses.

Screenshot of Color

How they are going to pull off the same trick with Color is not clear. The app has a new twist on photo-sharing - allowing you to see the photos of people nearby using the app, rather than those uploaded by friends. And everything you do with Color is public.

It’s not an immediately attractive concept - when I tried to explain it someone pretty technically savvy his response was: “So people nearby who are taking pictures can see my pictures whether I want them to or not? Creepy!”

Still, we all thought the same about other social media startups like Twitter which turned out to be huge hits. And I can see that at huge events like Glastonbury it might be fun to see what everyone else around you was posting.

But the problem with arriving on the scene laden with cash and making a big noise is that you need to be an instant hit, especially if your app depends on the network effect to become useful.

When I tried it out, it was difficult to see the point because nobody else nearby was using the application. And with influential bloggers like Robert Scoble already bad-mouthing Color for similar reasons, it is hard to see many deciding that this is something they have to try.

Right now, though, with sky-high valuations on everything “social” - from Facebook to Groupon to Zynga - the venture capital  community seems willing to pay any price to get in on something that might be big one day.  A few of their bets will pay off - but if the dot com bubble is anything to go by, most of those who invest in the social bubble will lose their shirts.

Comments

  • Comment number 1.

    How much was Facebook supposed to be valued at again? I lost count. It would be nice to think that some of the people making decisions about this actually knew their stuff, but then the problems were obvious long before the last dot.com bubble burst and they're even more obvious now.

    Unfortunately history has always shown that having a lot of money and knowing how best to use it don't always go hand in hand. I wouldn't mind so much but wealthy people can often afford to lose a lot of money, the problem is that markets are three dimensional beasts and those worst affected often end up being the poorest in society.

    Common sense, where art thou?

    Mark
    Editor-in Chief
    ISPreview.co.uk

  • Comment number 2.

    I can see how this might be useful, you're at Glastonbury 150ft from the front. You want to see the band so you use the app to view other's photos.

    No doubt it will be taken up with dodgy people sharing photos of themselves or worse, you.

    I wonder if there will be an English version :)

    PS, the layout of the app makes no sense.

  • Comment number 3.

    More toys for people with nothing better to do, who want to stay like children forever.

  • Comment number 4.

    Yes, you can write an app in your bedroom, but for social networking you also need servers to link the app users together. You also need to write the server-side code, which is often a lot more complex than the code running on the users' phones and PCs. My guess is that this where at least some of the startup capital is going.

  • Comment number 5.

    Here's my burning question: will it be renamed Colour for the UK/Commonwealth market?

  • Comment number 6.

    I have to agree with Rory that this kind of level of investment at such an early stage in the company has bubble written all over it, although with anything that deals with media content the company certainly needs seed money for servers and storage.

    I see little to no value in seeing photos of an area I'm geographically close to, after all I may as well just view it with my own eyes - however, where I think this will have value would be overlaid onto Google Maps or similar, to provide context rich, visual information about various locations that perhaps Streetview just can't capture. If you consider a Google buyout of the company within 12 - 24 months, suddenly $41 million could look like a cheap price and a worthy investment.

  • Comment number 7.

    Some of that money will be spent on employees and infrastructure but the majority of that investment will be burned away as marketing expenses. Yes, you can write an app in your bedroom and upload it to an app-store, but it takes much more to get it noticed and tell the whole world about it.

  • Comment number 8.

    Don't Apple already have a piece of their own software called "Color"?

  • Comment number 9.

    Well, I'm one of those people who thought Facebook would never catch on, and that Twitter is pointless, so it's probably best not to invest on my advice! But I share the sentiment of your friend: this is rather creepy. This looks like a great app for perverts: assuming one was so inclined, one could take pics of one's own self naked, and share them with the neighbourhood, without leaving one's home. Is "virtual flashing" a crime?

    But regardless of a minority abusing the technology (which is inevitable), frankly, the idea that every time I'd want to use the app, I'd be bombarded with the pics of other users, just looks like another form of spam to me: 'Photo-spam'. Expect to see millions of carefully styled photos of various products being enjoyed by beautiful people having fun... and then you'll wonder why you suddenly feel hungry, or thirsty, or fancy buying a new thingamajig... we're all doomed, I tell you...


  • Comment number 10.

    I can see why and how facebook is worth so much. They have zillions of subscribers, what else do they need to monitise the platform?

    On the other hand, $41 million for a mob app??? I'm not so sure. As a start, mobile applications are limited by the screen size, ie limited features and less ways of displaying ads. I usually turn off the internet connectivity on my android device so that the ads aren't displayed on the free applications I use, I wouldn't pay for an application.

    The ads are just annoying on such small screen and they slow down my mobile, so I just turn them off.

    In a way, I both agree and disagree with this blog. There is lots of potential in the social networking, but that doesn't necessarily mean all social networking websites/applications are going to make lots of money.

  • Comment number 11.

    No. 9. Facebook is pointless and its value will not last in the medium to longterm unless it keeps changing and developinig. Myspace anyone? Twitter is really pointless. Do "we" really think our every utterance is worth noting and posting. O god but that's what I'm doing here! Bugger.

    But on a serious note what a load of B*****ks!

  • Comment number 12.

    I can just imagine the shared photos from couple's tents at glastonbury... cyberdogging anyone? Obviously you'd only use this app for photos you are happy sharing with anyone nearby and due to aforementioned possibilities it would have to be suitably policed. Policing it would require every single uploaded photo to be vetted by a human being before being put on the network. Costly...

  • Comment number 13.

    Thanks Rory.

    I think Mark Howe hit the nail, with the reference to server costs (all those photos need to be stored somewhere, as well as back-up solutions - just as an example Facebook has 30,000+ servers per first search hits when googling this).

    I'd be very surprised if Sequoia would be careless enough to burn it all on marketing costs.

    Where Color gets interesting (and hence potentially worthy of investment) is that they have managed to do something new - 'automagic' social graphing (on Facebook you determine who your social graph / friends are; on Twitter you decide who to follow). On Color your social graph is taken care of for you based on your location, and who you are regularly nearby (this will develop further, spending some of the 41m ...). No-one else is really doing this yet, and it could potentially lead to a Facebook killer. I'm not saying it will, but the probability times the potential upside could possibly explain some of the investment rationale, and I'm sure the investment is phased, and somehow protected also ...

    Lots of great discussion over on Quora on this also.

 

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