A few months ago I went looking for technology vendor Facebook applications and found one from Microsoft that had just launched: Microphone. At the time there was not much activity, but I recently checked back in and was impressed with (at least parts) of what I found there. Now, I should admit that I am grading on a curve here; most of the apps I found were miserable, like this one from HP.

So what about the Microsoft app works?

First, the entire application has a gaming element to it and they award prizes to the most active users. Time and time again we see that these sorts of competitive games resonate with users and Microsoft has done a nice job of taking advantage — if you notice the leader board is monthly, so no one should feel completely frozen out.

Second, they have taken steps to incorporate other social networks and communications tools like Twitter. Microsoft has taken good advantage of a SocialEyes application to scrape Twitter and bring the conversation into Facebook (see below). I’ve actually never heard of this company but LOVE the approach; has anyone out there worked with them in the past?

Third, they have focused on tangible business functions like market research. A lot of companies have made forays into Facebook, Twitter, and other communities over the last few years and thus far few have real tangible business value to show for it. With this implementation Microsoft has done a great job of keeping their feet firmly planted on solid ground, focusing on customer care and market research. I am likely a bit biased by the fact that I am a market researcher, but this aspect of the application is especially well thought out. For example we see Microsoft measuring customer reaction to recent television ads (see below). Admittedly this is not a substitute for real quantitative market research, since anyone adding the Microsoft Microphone application is likely a bit biased in the first place, but if done right it can provide solid directional data at almost no cost. The poll question about joining a programming competition is spot on — you already have a group likely to participate and this can be a great way to get their input.

Now, I would lose my analyst card if I didn’t lob at least one stone at Microsoft and this one (at least for me) is a doozy. Look closely at the Apple and PC TV ad questions. Notice anything? Oh yes, they inverted the scale from one to the other, starting the Apple ad scale at “Hate it” and forcing people to keep reading if they don’t hate it. For the PC ad they start at “Love it” and head back the other direction. Subtle, but a MAJOR problem if you are looking for objective research! Then again, maybe the marketing guys were looking to show some success to management, in which case, carry on gentlemen.

All things considered this is one of the best vendor Facebook applications I’ve seen and it should serve as a pretty good model for others, even those selling B2B — know your audience, provide them some value, provide them an engaging experience, and keep it grounded in real business needs.

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I’m currently at the Atlassian Summit catching all the updates to Confluence — one of the most popular enterprise wikis in the world — and generally taking in the scene of a small company that is amazingly open and customer focused.

This morning’s keynote was run by CEO Mike Cannon-Brookes and at the very beginning he ran through the corporate values for the audience of mostly customers and developers. He explained that the values had been set several years into the company’s existence when the management and employees got together to codify what the company was all about.

The results (censored for your protection, though they were out in all their glory in the session):

1. Open company. No bulls#!%.
2. Build with heart and balance.
3. Don’t f*!# the customer.
4. Play as a team.
5. Be the change you seek.

I spoke to a couple of Atlassian employees about the values and it turns out they are more than just vague corporate platitudes; they are often invoked to solve disputes internally, and to push employees to better performance.

Over the last few years customers have become increasingly demanding of their vendors, and are now expecting

• Visibility into the direction of your company
• Community that shares purpose and knowledge
• Influence in the future direction of products they care about
• Opportunity to learn from vendors and peer

The Atlassian corporate values do a nice job of mixing both increasingly demanding customer needs with corporate needs — customers for example don’t care about being the change you seek — and have lead a small technology vendor to an enviable growth rate, out-sized market position, and fantastically loyal customers. I’d say these corporate values are worth emulating; with or without the colorful language, depending on your audience.

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My guess is you have heard the news by now, but if not it is worth pausing to note that SuiteTwo — the Intel backed Enterprise 2.0 offering that launched in 2006 — has officially closed up shop. All things considered this is not much of a surprise. While the joint venture between NewsGator, SimpleFeed, SixApart, Socialtext, and managed by SpikeSource was a big showstopper when it launched, the offering never realized its potential and died a mostly silent death. To be honest I can’t remember the last time I spoke with a company that was even considering the product.

The main problem was not the concept – the market has aggressively moved towards suites of blogs, wikis, RSS, and social networking – but instead the execution. Though Socialtext founder Ross Mayfield always disputed the label, SuiteTwo never became more than a ‘Frankensuite,’ a group of individual applications duct-tapped together. While I’m looking out for recession casualties, SuiteTwo clearly had bigger issues.

For the few SuiteTwo customers out there now looking for another solution my advice is to examine your firm’s use of the technology and reach out to the appropriate component vendors. Unless your firm has been inordinately successful at integrating the entire suite into your processes, you are likely making most use of just one or two features, while the others are mere accessories. Reach out to the vendor of that one killer feature first; all the vendors involved are still around and most have matured their product sets to a level comparable with SuiteTwo anyway. In all likelihood you should be able to replace your existing implementation pretty seamlessly with what is now better software.

As for NewsGator, SimpleFeed, SixApart, and Socialtext: I would be shocked if they weren’t already picking over the carcass. There may not be many customers to grab, but those that are out there should be highly profitable – they know the tools are valuable, don’t need training, and will have a very short sales cycle. Happy hunting!

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Update: Traction President, Greg Lloyd weighed in via email. See below for his comments.

Traction Software, one of the blog and wiki vendors selling exclusively into the Enterprise 2.0 space, announced last week that “2008 marks the sixth year of consecutive revenue and customer growth at Traction Software.” This is the same drill as for MindTouch; with the wind at its back in (most of) 2008 Traction better be setting new revenue records. Congratulations to the Traction team; Jordan hasn’t been in my ear every other week as of late so it looks like things are busy over there.

The other news Traction announced is that “To thank existing customers for their support, and welcome new customers, we’re offering a 20% discount on commercial or non-profit price of all software licenses or upgrade purchases made between November 17th and the end of 2008. The promotion applies to perpetual licenses as well as the annual subscription options announced in June.”

My first thought after reading that announcement: “Uh-oh.” I applaud Traction for taking decisive action and slashing its already affordable pricing and grabbing customers now, but clearly there are larger forces at work here than a simple thank you to existing customers. My guess is they have 20% slack built into the pricing anyway, but to cut it right off the top is aggressive. Either the company is struggling to meet growth targets — despite the positive returns in 2008; the economy is taking a toll faster than I thought it might; or the competition in the market is really starting to hurt. I would guess it’s a bit of all three, though I’m not terribly bullish on Traction’s long term prospects; it feels like the market has started to leave the company behind.

I’ll be on the lookout for more discounts — advertised or otherwise. If we see more than a handful of vendors slashing prices I may need to revise my market projection downward with prices falling faster than I originally modeled.

Jordan, I’m looking forward to an earful, though I’m traveling the rest of the week, so you may not hear from me right away!

Update: Greg Lloyd, Traction software President sent me a quick note on the post and has agreed to let me share his comments.

“Hi Oliver — I enjoyed finding your Strategic Heading blog – via Google  alerts – and encouraged Jordan to speak for himself on  your ‘Traction Offers A “20% Year End Discount”‘ From me: it’s not a price cut, it’s a 45 day promotion. As Freud said,  sometimes a cigar is just a cigar.

“We have a limited downside closing deals one or two quarters earlier than we otherwise might, and a good opportunity make our case as the smart alternative for penny-pinching visionaries who have a business purpose firmly in mind.”

As I wrote originally, wrapping up customers today, before budgets flip to 2009, makes a ton of sense and Traction is smart in doing so. That said I’m not quite ready to believe that a cigar is just a cigar in this case; in all something just leaves me uncomfortable. But as usual I am more than happy to be proven wrong.

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MindTouch has reportedly grown its revenue very aggressively in its past fiscal year. According to VentureBeat, “in the year ended October, the company says its revenue grew 612 percent while the number of customers grew 368 percent.” The company blogged about the news earlier this week.

This is a big number but not unexpected. MindTouch was growing from a small base — MindTouch is an open source company — and the wind was most certainly at the company’s back in 2007-2008. As someone who predicted a 47% CAGR for the enterprise Web 2.0 market its nice to see these kinds of numbers, though clearly they are not going to be typical for the industry as a whole.

No word yet if the company is profitable — my gut says no — but in either case congratulations to Aaron and the team.

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I had a great briefing this week with Ross Mayfield, the founder, Chairman, and a few other things over at Socialtext. In the course of the briefing we discussed my recent report predicting falling feature prices in the Enterprise 2.0 market — ReadWriteWeb has an excellent summary of the research and a lively discussion.

Ross’ concern — which seems like a reasonable one to me — is that customers may look at my report and ask “so, where is my price reduction?” This logic makes sense if the product set is not changing; if Socialtext was offering a wiki feature last year, and is only offering a wiki feature next year the revenue they can expect from that product is going to come down. There is just too much competition, too much bundling, too much commoditization.

With Socialtext, however, this is not the case. The company recently announced the launch of Socialtext People, a social networking module in Socialtext 3.0. Now, instead of simply facing falling prices for the its wiki feature Socialtext has added social networking to the mix, which will increase the average deal size for its customers. In essence it is moving up to a higher price plateau. That plateau is still going to lose value over time, but if Socialtext, and any other Enterprise 2.0 vendor, can continue to innovate and combine features the revenue the company sees will continue to rise — even as the price per feature falls.

It is still possible to improve the quality of the features offered, and if that improvement is compelling price erosion can be held off, however this treadmill is much more difficult to stay on, and Socialtext’s strategy of adding other features (while improving existing features) is the right strategy — it actually happens to be the exact strategy I advocated back in April in the recommendations of my market sizing report.

In the long run falling prices are going to make this a very difficult market in which to survive, but a nimble company that can continue to innovate should do well for the short run. And, as Keynes famously said, in the long run we are all dead (or at least happily retired).

*Upcoming research note: I’m trying to convince my colleague Gil Yehuda to take the analysis used for my report and write the “Users: Here Is How To Take Advantage Of Your Vendors” report. It won’t help Ross, but at least he has a compelling case to make to his customers.

*Briefing note: To brief me on your product please fill out this form with Forrester’s Briefing Central group. They manage all the scheduling (thank god) and the service is free. Hands down it’s the best way to get a hold of me.

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