Facebook at 10: I Expect More

Today should be a celebration. Facebook has reached the age of 10. It connects over a billion people. However, as active as I am on Facebook and as much value, and fun, I find from it, I can’t help but be terribly disappointed. I suppose it was inevitable. Monetization (and going public) are harsh mistresses. So, what’s the source of my disappointment? I wanted the social web, not a social site.

I hate to say I saw this one coming. When Facebook went public, listed right there under “risks” in its S-1 registration statement was a note that people conducting social activities on other web sites represented a risk to their business. But I want that to be their business.  I want my social graph to follow me everywhere.  Bringing that graph across all sites should enable all sorts of functionality and value. The problem is that this represents value for us, not Facebook. Monetizing an API is a tough business, certainly more difficult than taking a billion people and monetizing them through advertising. Thus, while Facebook offers Facebook Connect and some sites try to integrate in rich fashion with Facebook and your social graph, this is nowhere as ubiquitous as we all want it to be. And that’s because, plain and simple, Facebook doesn’t make any money that way. The realities of business have hit the ideals of connecting the world’s people. We want to connect them…on our site.

It’s a shame, really. We all want a social web. It would transform our experience, for the better, on most of the web sites we visit on a regular basis. But we’re not going to get that from Facebook. Instead, we get sponsored ads and brand posts and shockingly mis-targeted sidebar advertising. Do we have any chance to get that and, if so, where is it going to come from? Interestingly, we might actually see this connected social web. First, Google and Google +. Don’t laugh. Yeah, no one really uses it. Or do you? Google is actually insinuating Google + into a variety of activities (YouTube, App store, even search) in a way that pushes the social web site to the back but transforms your ordinary activities with social connections. This is a vastly underappreciated move on Google’s part. The other potential? IBM. Again, don’t laugh. Some years ago, fearing Facebook’s control of the social graph, Google launched an initiative called OpenSocial. In typical Google fashion, they lost interest quickly. Fortunately IBM understand the power of an open social graph connecting disparate systems, within and across the enterprise as well as with customers. Thus, IBM has assumed stewardship of the OpenSocial initiative and is actually devoting real resources to it. Starting from the enterprise out is not always a sexy approach to software distribution but it can actually deliver much more complex solutions albeit in longer time frames and with less visibility. But don’t disregard OpenSocial.

Facebook at 10. A remarkable accomplishment. A powerful force. But most of all, a perversion of the real social vision. The next 10 years will be much more exciting.

 

Enhanced by Zemanta

Taking the Social Revolution Back From the Marketers

Facebook recently bought Microsoft’s advertising platform, Atlas, as it seeks to offer greater functionality and insights to its advertisers.  This was a subject of great discussion in the Internet Oldtimers  group of which I’m a member.  Friend and fellow member Tom Cunniff made a provocative statement which encouraged me to respond. While the rules of the group are “what happens on the list stays on the list” — we are free to talk “out of school” — Tom was gracious enough to let me reprint our exchange here. (By the way, if you’re an advertiser or publisher looking for deep insights into the whole advertising space, on- and offline, Tom is your man.)

Tom:

According to CNET, “The deal could help Facebook develop its own one-stop shop for advertisers and agencies to buy, sell, optimize, and track ads across the Web. The idea is to help Facebook give marketers tools to target ads based on social habits that it captures, and to better understand how social activity influences consumer purchases. (…)

The expectation (is) that Facebook will create an ad network that lets it sell ads outside of (FB). Facebook is already plugged into tons of Web sites through Facebook Connect, and each time people share or “like” an item on a site, Facebook’s data trove gets a little bigger. Facebook can connect that data with the information from within Facebook — the social graph — to create a social ad network that is potentially more effective than Google’s AdSense.”

Personally I don’t believe social activity influences consumer purchases much at all. It has value, but no more or less than a billboard: it’s drive-by media.

Boy, that last line got my blood boiling.  So I responded:

Tom, you’re absolutely right and you’re completely wrong.  And we’re about to ignite a debate that should get us a keynote at ad-tech or even better.  :)

You’re right that  today’s social activity doesn’t influence much consumer behavior.  Even worse than the drive-by billboard — that has some value — it’s more like somebody giving you the hard commercial pitch during your cocktail party.  Not only do you not want to hear it, it probably produces some negative brand value.  Marketers may be able to gain some deep insights but, channeling my inner Nassim Taleb, I’m not sure that this increased data produces improved selling.  But that’s a discussion for another day.

But here’s where you’re wrong.  I have believed for a long time now, over five years, that the ultimate expression of the social revolution is that the consumer will gain increased power.   Today’s consumer is largely at the mercy of marketers.  The marketers have all the goods, all the insights, all the power.  And how are they using that?  Among other things, price discrimination.  There used to be things we all saw (largely) the same price on — things at the supermarket, things in the department store — and things that we all saw (largely) different prices on (cars, hotels, airlines).  There was some price discrimination — the same item might cost different at Neiman Marcus and Walmart — but many things were very similarly priced.  Now, with the “advances” of online, the things that were priced differently are being driven closer together while paradoxically the things that were priced similarly are now being priced differently.
As to the latter, we’ve seen the recent exposes that Amazon, Staples and many others charge different prices based on competitive calculations.  The price you see likely isn’t the price I’ll see.  But I don’t think that’s durable.  Look at what’s happening to those items that were priced differently. Take cars.  I can’t vouch for the accuracy of the data (or my memory) but in the pre-Internet days something like half of all cars were sold at sticker price.  You didn’t know what someone else paid for the same car and dealers were able to exploit that lack of information.  Now the price you pay for a car is much more close to that which another person pays and some manufacturers are even dabbling with no-haggle pricing, basically saying you’ve got enough market information that you’re going to be able to negotiate effectively and therefore we’ll just bake that realization into our whole approach to pricing.  Take hotels and airfares.  Some of the booking engines will automatically give you a lower price if someone else makes a reservation at that price.  There are whole web sites now devoted to this kind of thing.  Yapta’s one and while I can’t remember it, there’s one hotel site that has you send them your reservation and they’ll actually shop it around to get you a lower rate.
I think the real power of the social revolution is that it will actually give consumers a more equal footing.  We’ll have more information and while the marketers won’t get the value of their increased information, because they’re asymptoting to no more value, we’re still on the steep part of the curve.  In fact, I believe this is where the “Facebook killer” will come from.  Facebook had an opportunity to be the champion of the individual as contrasted with Google’s championing of the marketer.  But they made the easy monetization choice and cast their lot with the advertisers.  Someone’s going to step into that role.  It could be a visionary startup.  If I were Steve Ballmer at Microsoft, thinking I’ve missed the social revolution, I might make that play, hedging bets with their Facebook relationship/investment.  It could even be someone like IBM, effectively an arms dealer equipping both sides of the battle.  They’re actually the leading player in the whole Open Social movement these days, taking over when Google inevitably lost interest. (It didn’t rule the world in the first 72 hours.)
Tom:

In my opinion, we routinely make the mistake of confusing direct response (DR) with brand marketing and try to make them the same. But, they are fundamentally different.All the pricing stuff you referenced is absolutely right in commerce but doesn’t have much at all to do with brands. In a transaction, more information is almost always a good thing — “you can buy the same thing across the street for less” is literally worth something to know.In a brand relationship, more information is often neutral or even slightly negative (“yeah, I know you prefer jalapeno ketchup but I hate jalapeno so…”).There are many things in our life that are not a considered purchase, and that’s actually an *awesome* thing. I can walk around the supermarket tossing stuff in the basket without thinking about it. I can either zone out — “hmm, with a better drum track this Muzak version of Live and Let Die would be really good” — or I can invest my time in thinking about something else.

In social, there’s this weird illusion that because Jonathan “likes” jalapeno ketchup his friends will somehow “like” it too, because he’s an influencer. But the reality is that at best — at the very best — a friend who hasn’t had jalapeno ketchup in awhile might see that you “liked” the brand and think “what the hell, I’ll pick up a bottle”.

Again, I’m not saying this has zero value. It just doesn’t have much more value than a billboard. It’s drive-by media.

Me:
I’ll accept your premise that DR and brand marketing are different, or at least that’s an argument for another day.  I could be provocative and say we’re getting closer to that thing to which every brand marketer pays lip service to but secretly laughs at:  your brand is what your customer says it is.  I believe that to a point but for the sake of this argument, I want to go in another direction.
Where I want to go is declaring that social/big data/mobile is moving us towards a world where DR components are increasingly prominent.  In the good old days, I was a loyal United customer.  Now I’ve got price comparison ability, unbundled services and shared experiences and what before was a brand/loyalty purchase is  +today, for me, much more of a DR-like transaction.  The “loyalty” programs are being devalued and instead we have new loyalty providers.  I get my points less from an airline or a hotel but from a credit card or from Founders Card, effectively a collection of like-minded customers who have banded together to achieve collective economic power that may not have been available to us individually.  We’re growing more DR-like and the brands we’re loyal to are those who aggregate our clout across the brands to which we once might have been loyal.
Tom:

The idea of brand loyalty was largely cooked up by ad agencies and embraced by marketers who want to believe it.In reality, in nearly every product or service category there are two or three “acceptable” brands a consumer might buy. Most customers have a preference, but can easily be swayed by a coupon or other offer.

More than anything, your brand is the product. Apple isn’t cool because of its ads — its ads have been cool because the products have been cool. The iPhone and iPad launch ads were basically product demos. Here’s the product and a hand using it, on a white background. And some cool music.

The closer a brand’s products are to being a commodity, the harder it is for advertising to differentiate them and the lower brand loyalty is.

But I would argue that the real reasons deals are becoming more prevalent are because:
A) that’s what marketers were erroneously taught that this is what “digital best practices” are; and
B) most companies over the past three decades have become much better at taking costs out of products than at putting innovation into them.

Tom again:

More than anything, my argument rests on efficiency — both for the marketer and the consumer.Let’s start with marketers. There is no doubt that word of mouth is effective, and that social media mentions have value (even as drive-by media). The question for marketers: what is the most efficient way to generate this?

I would argue that the two most efficient tools to generate these are:
1) Superior products; and
2) Mass marketing

Consider Apple vs. Dell. Apple has invested zero in social media. ZERO. Dell has been a poster child as an early adopter of social media.

Apple has invested heavily in creating superior products and in mass marketing. Dell has invested heavily in social media.

Which brand has more positive word of mouth and social media mentions?

Now, let’s consider consumers. There is no doubt that there are more ways than ever to research products, and that advertising is generally viewed with skepticism and sometimes derision.

However…

Deeply researching only those products that are in your kitchen would take a large number of hours for scant return. It’s just not efficient. So, how do we choose? We know what the big brands are because they advertise — which also ensures they are the ones we can easily buy at our local store. All of these brands have some sort of reputation, good or bad.

Typically, a quotidian purchase gets very little consideration at all. And this is *good*. The downside risk of choosing the wrong brand is scant, and the upside reward of choosing a better brand at the supermarket is marginal at best.

This flips *entirely* for high-consideration purchases. Trust me when I tell you my wife and I researched our new kitchen appliances to death. Same for our car, same for travel. Why? There was big upside to getting it right and big downside to getting it wrong.

Despite all this, a problem for Facebook — and for all of social media — is that there’s only so much consumers can hear before they stick their fingers in their ears. Personally, the more people I follow on Twitter, the more unusable it gets. The more feeds in my RSS reader, the more unusable it gets.

Attention is scant, and fragmented. On a fundamental level, I get that being “always on” makes it more likely that a customer will randomly bump into my message. But when everyone is “always on” it’s also damned noisy.

The final word
It’s my blog.  I get the last word. :)  Tom and I perhaps agree more than we disagree.  The current forms of “social advertising” are fundamentally flawed.  The reason why Google is so wildly profitable is that its advertising space is highly contextual.  When I search, the fact that someone will actually pay to put their message in front of me means they think they have something to offer to me.  In a social context, you may have great information about me but the context is wrong.  I’m not on Facebook to be advertised to.  Advertisers are not enhancing my social interactions.  We’re still years away from it but I believe the social revolution will flip the relationship between marketers and customers in profound ways.  But that’s enough for today.
Enhanced by Zemanta

Pardon My Disruption: March Edition

I’m a little late getting this post up here — we recorded the session a little over a week ago — but better late than never.  And for the second time in a row, snow interrupted our plans so instead of recording with a live audience at the Stamford Innovation Center, we participated remotely (using Google+ hangouts).  I do need to work on my video skills. Despite having two lamps just out of camera range, my lighting is suboptimal.  Then again, my pretty face is never going to carry the day… :)

For those of you who want to watch the full video (an hour), you can find it here.  This month, we talked about:

  • Yahoo and Marissa Mayer’s work-from-the-office edict
  • Groupon’s CEO resignation
  • The new Facebook feed
  • Microsoft’s EU fine
  • iWatch (we didn’t really talk about this in the video here but I’ve got a few observations)

Yahoo and Working from Home

This is odd, coming from someone who has spent large portions of the last 20 years working from home and who is such a big believer in collaborative technologies, but I totally understand and support Marissa Mayer’s decision to require Yahoo employees to work from the office.  Fundamentally, she inherited a broken company.  I’m a member of a group called the Internet Oldtimers and one of the group’s members described the scenario perfectly.  He said that good people in a bad system become bad people whereas bad people in a good system become immediately evident.  Yahoo had a bad system which encouraged even the best of people to perform at substandard levels.  How do we know Yahoo had a bad system?  Mayer came from Google, as data-driven an organization as I’ve ever encountered, and simply, she went to the data.  It would be one thing if people were working diligently from home but the data just showed another story.  Mayer looked at the VPN logins and quickly discovered that people weren’t connecting to the company’s internal network.  It’s one thing to say collaborative tools enable remote working.  It’s a whole other scenario when your workers aren’t using the collaborative tools!  They didn’t even bother to fake working very well.  Yes, the system was broken.  You could argue that this is a draconian step and that it will cost Yahoo in terms of current employees and ability to recruit new staff.  That may be true but the bigger challenge is reorienting the organization and bold, decisive moves are required.  I don’t expect this to be a permanent work condition but until and unless Mayer showed her commitment to a new Yahoo, she would have been merely rearranging deck chairs on the old Yahoo.  I applaud and support the move.

Groupon’s CEO Resigns

Too much of this story has been about Groupon’s ex-CEO Andrew Mason and his polarizing style, his company accounting challenges and his flamboyant resignation (refreshing in its candor). I actually wrote about Groupon over two years ago, questioning their business, and in the intervening time, I think their challenges have only grown larger.  Here are the fundamental problems for their business (and not just theirs, but LivingSocial and many other daily deals purveyors):

  • The deals are not great for merchants.  They’re indiscriminate, send a bad message, encourage “bad” business, don’t help the merchant’s information-gathering and give the merchant almost no control.  Other than that, they’re great. LOL
  • The wrong party is in control.  Deals should be structured, offered and managed by the merchant itself.  You should be able to offer deals whenever you want to whomever you want.  My favorite talking point here is to use the example of a donut shop.  Let’s say you’ve had a slow day and it’s looking like you’re going to have to throw out a bunch of donuts.  Wouldn’t you want to run a deal at the last minute, just in time for the evening rush hour, offering a special? You could make this look like a customer incentive for your best customers instead of the existing model where you’re discounting products/services that your loyal customers have been paying full price for.  You could make this decision at 4 p.m., instead of weeks or months in advance.  You could do this every time your inventory is high instead of once every few months.  This is a fundamental problem of approach for Groupon and its ilk, and not one a new CEO is going to solve.
  • To feed the public market appetite for growth, Groupon moved from daily deals into an adjacent market, Groupon Goods.  I’ll never understand why companies move into businesses that jettison much of what’s attractive in their legacy business.  The great thing about the daily deal business is that you have no inventory.  Your only three cost buckets are technology, marketing, and your sales commissions.  This is a business with minimal risk as you can align costs relatively easily to revenues.  With Groupon Goods, you’re now taking possession of inventory.  If you don’t sell it, you’re stuck with it…or you have to lower prices, cutting your margins.  Before this, Groupon could have been run out of a phone booth.  Your servers were in the cloud, your salespeople were on the phone or on the road, your inventory was totally digital.  Instead of pushing, and fixing, the core business, Groupon went broader.  Big mistake in my mind.

The New Facebook Feed

Facebook is rolling out a new look and feel.  Again.  I wrote about this challenge even longer ago, almost four years back now.  Back then, the challenge was competing with Twitter and its real-time impact.  That challenge remains to this day and we’re now hearing of Facebook’s plans to incorporate hashtags, mimicking yet another Twitter feature.  Facebook is now fighting battles on multiple fronts.  In addition to Twitter, there’s now a battle for approach and design with Pinterest and Instagram.  Yes, I know Facebook now owns Instagram but if you look at Instagram, Pinterest and even Microsoft’s new platforms, you’ll see a more richly graphical approach.  I won’t get into this approach…well, maybe I will, briefly.  I think much of this is eye candy at the cost of value, information and time.  A picture may be worth a thousand words in some contexts, but in a lot of these instances, I’d rather see the thousand words or at least something that conveys greater value than just an image and a text headline.  I think a lot of the motivation behind this approach is to get people to actually click through on something.  More clicks = more opportunities to display ads or at least pump up your metrics.  For the user — at least for me — more clicks = more time to get to value.  I really don’t like the approach.  But Facebook seems to be embracing the approach, whether it’s to increase its advertising footprint or contain Pinterest.  There are laudable goals in the redesign — more easily connect users with the information they want to connect with — but I’m not convinced this is the real motivation or, if it is, that this redesign accomplishes that goal.  But as always, we’re stuck with it.  Expect to see tons of posts from your friends decrying the new approach…until we accept that this is the way it’s going to be.  Oh well.  At least maybe they’ll fix the multi-columnar approach, the logic of which I still can’t figure out.

Microsoft’s EU Fine

Microsoft was fined $731 million by the European Union.  Why? Because it didn’t fully implement its deal to open up the browser market to competition, a deal struck in 2009.  At that time, Microsoft had a near-dominant share of almost 80% of the desktop market.  We all know what’s happened since then. Despite not keeping up its bargain, Microsoft’s share has steadily decreased and it now represents only about half of the desktop market and, if you factor in mobile, considerably less than half.  In fast-moving markets like technology, somehow markets do a better job of adapting to competitive situations than governmental remedies.  I’m not saying that the EU’s fine was misguided — they have to enforce their agreements — I’m just saying that the EU sanctions were, and continue to be, largely ineffective.  Fining someone for four year old behavior (several generations in Internet time) while failing to act on current issues is, unfortunately, what we’ve come to expect from governmental bodies.  I’m not advocating that they go sue Google but if they’re genuinely concerned with fostering real competition, going against emerging and existing monopolists with sanctions with real teeth would be much more impressive than what amounts to a (soft) slap on the wrist to a former monopolist.  If anything, this action would encourage me if I were considering a current offense.  If this is the timeframe and scale over which remedies will be extracted, it’s no deterrent at all.

iWatch

Somehow I can’t get excited about this one.  Perhaps Apple’s going to surprise me.  Again.  But I just don’t see an iWatch as the product which is going to reinvigorate Apple’s prospects.  Back at the beginning of the year, I said their big opportunity is the digital home, and I stand by that belief.  Yeah, yeah, the watch market is a $60 billion market.  But if you’re under about 28, you probably don’t wear a watch.  Can Apple make it cool?  Probably.  But the trend is to bigger screens, not smaller, and I’m just not convinced that anyone can make a watch a compelling companion to my smartphone, and make no mistake about it, this will be a companion product.  I feel bad enough when I have to shell out $100 with every new phone for screen protectors, batteries and the like.  Is it that much more powerful to have reminders on my wrist instead of in my pocket?  Perhaps it could be a little more interesting if it incorporates the emerging niche category of activity monitors like Jawbone’s Up.  We’ll just have to wait and see.

What’s perhaps most problematic for Apple is that their time to market advantage may be non-existent.  Apple has had huge market advantages when it has launched its category-defining products, with competitive responses often lagging by a year or more.  Not so with the watch.  In fact, while the Apple iWatch remains merely a rumor, Samsung has come public with its intention to do one, and its indication that it has been working on it for a long time.  While I question how genuine that effort was prior to the Apple rumors, it’s clearly a different world when a rumored Apple product introduction is met by immediate competitive responses, not stunned gasps of “they did it again.”

What’s Next

In addition to these timely news items, we talked about a couple of larger thematic subjects:

  • The “IT-ization of consumers”
  • What’s next, after social, mobile and cloud

I’m not going to get into these here and now — this blog post is already long enough — but i’m going to write at greater length about these topics in the coming weeks.  I identified social, mobile and cloud as my three disruptive trends, over five years ago.  As they begin to coalesce as I predicted, people started to ask me “so what’s next?”  For a long time, I answered that with “more commercialization and better integration of those pillars.”  We still have a long way to go there. But I already see the seeds of the next big transformation which will, once again, change the face of technology and business.  I just love that about this business; it’s never static…even while we all struggle to keep up with the pace of change and have to fight to incorporate new technologies and approaches.  But the next change is coming and I’ll start surfacing that soon.  (If you want a head start on your competition, you know where to find me.)

 

Enhanced by Zemanta

Pardon My Disruption, Episode 3

Pardon My Disruption, Snowbound Edition

I have been working with the Stamford Innovation Center to produce a monthly show I call “Pardon My Disruption.” I am a big fan of the ESPN show “Pardon the Interruption” in which two literate sportscasters (no, not an oxymoron but clearly a small universe) banter about and debate the news issues of the day.  If you’ve never seen an episode of PTI, you can watch it here.  It’s a great format and if you’re interested in sponsoring this for technology in a big way, get in touch with me.  I’m really going to see if I can get this done.  Until then, I’m taking this tentative first step with the Center’s Marketing Director, Peter Propp.  We generally do this live the second Friday of every month at the Innovation Center but with Nemo hitting the region last Friday, we did the session remotely (using Google+ Hangouts).  You can enjoy the show at the link which opens this post.

Our subjects this time included:

  • Meetup.com
  • Dell goes private
  • IBM Connect trip report
  • The New York Times gets hacked: Cybersecurity

Meetup.com

Meetup is one of the best kept secrets of social media.  Some of you may remember the blockbuster 1988 business book Megatrends by John Naisbitt.  That was one of the very first business books that captivated me and to this day, I remember Naisbitt promulgating a “high tech/high touch” philosophy.  (This wasn’t the dominant theme of the book but is one of the points that sticks with me to this day.) Remember, at this time, technology was nowhere as prevalent in our lives as it is today.  At this point, Windows was still a new product, the Mac was still in its infancy and the leading PC manufacturers were Compaq and IBM.  Anyhow, Naisbitt’s point was that the more technology invaded our human lives, the more we would have need for a human touch to counter the impersonal nature of computer interactions.  Even as we move more interactions to social platforms, email and other technology-based platforms, it would be folly to forget Naisbitt’s forecast.  Tweetups — where Twitter users actually get together in a physical location — and Meetup are two of the more obvious manifestations of this phenomenon and bring with them a power that’s not present in virtual-only communities. We’ve seen this with getting Pardon My Disruption off the ground.  We tweet about, we Facebook and LinkedIn it, but the largest driver of traffic to the physical event is Meetup.  If you haven’t looked at Meetup, you should.  Some of my best meetings of a month are Meetup groups (New York Tech Meetup, New York Enterprise Tech Meetup) and I find a fair number of social activities there as well (e.g., the Bucket List Bunch).  The New York Tech Meetup is a powerful force in the New York tech community and gathers over 700 people to an NYU auditorium every month.  Getting tickets to it is akin to getting tickets to a Springsteen concert on Ticketmaster; you have to keep clicking refresh on your browser and get tickets in the first 10 minutes they’re available or basically they’re sold out.  A powerful platform to bring people together physically.  How quaint in this virtual world.

Dell

I’ve often chided Google for being a one-trick pony…but it’s a damn good trick.  Dell (nee PCs Limited) came up with a great trick 30 years ago — build PCs to order.  In the intervening years, even slow-moving behemoths like HP have caught up with that trick and it’s now an industry standard.  Meanwhile, Dell has tried to change the story, moving upstream into servers, networking and services.  But it has been a slow slog. In today’s next quarter obsessed world, it’s hard to make radical surgery on a company.  And make no mistake about it, Dell needs radical surgery.  Going private doesn’t solve their problems, by a long stretch.  Even as a public company, Dell has, charitably, underperformed in its efforts to remake itself.  You just have to scratch your head and wonder how so many tech stalwarts managed to miss the mobile and cloud revolutions. And Microsoft’s involvement in the Dell financing only complicates matters or, more troublingly, sends the message that Dell’s “reinvention” won’t be so different from today’s Dell. And this deal leaves Michael Dell firmly in charge and one has to wonder if he’s the man to lead the reinvention.  Dell has largely been off my radar screen for a decade.  We’ll see if this move leads to a more disruptive Dell or just incremental, and insufficient, changes.

IBM Connect

I’ve posted recently about IBM Connect and the remake of IBM so I won’t say much here.  The only thing I’ll add here is a few thoughts about the impact of its Smarter initiatives internally.  While suggesting that the external market may not be precisely aligned with the way IBM is selling its collaborative solutions, there’s no ignoring the fact that the Smarter message has served to focus and align the company internally.  It’s almost nauseating  how universal IBM people talk about Smarter this or that.  It permeates all levels and functions of the organization.  One of the challenges of large companies in a fast-moving world is getting all facets of an organization focused on a consistent and aggregated message.  IBM’s ability to get the disparate business units aligned around consistent messaging and even more, deep product integration is a truly remarkable accomplishment.  If customers start to align with IBM’s messaging, IBM is unassailable. No one can deliver what IBM is delivering.  It’s a big if, but as a long-time IBM watcher, a fascinating story to watch unfold.

Security

As much of a technology lover as I am, in my rare dark moments, I have grave concerns about the fragility of the systems we’re building.  Quite simply, no one really understands how they all work and so that leaves us vulnerable in some deeply troubling ways. From what can only be called state-sponsored cyberwarfare down to more mundane financial theft, we live in fragile and troubling times.  The solution is not simple, complicated by the disgusting politicization of this issue in Washington. I won’t turn this into a political screed but instead in the webcast, we focused on what we as individuals can do.  Bottom line:  you need better password practices.  It used to be that we didn’t want to write our passwords down because the biggest risk was someone sitting down at our computer and stealing things.  Now the biggest risk comes from someone who steals your password over the Internet.  For those of us who can’t be bothered to have different passwords for different sites, once they’ve got your password, they can harvest it in myriad ways.  So, do what I’ve done.  Get a password manager — I use Dashlane – and make sure you have strong passwords and different ones for every site.  And if you’re concerned about the security of the password vault, and it’s a legitimate concern, write your passwords down…or get used to the “reset password” function of your web sites.

—–

See you March 8 at the Innovation Center.

Enhanced by Zemanta

Stalker Heaven: Snap a Picture, Get an Identification

I’m generally someone who lives a very public existence and suggests that most people get used to that notion.  Google, however, is about to test our limits here.  They’re apparently about to introduce a mobile application comparable to their existing Goggles but instead of identifying places, it identifies people. [UPDATE:  Google denies working on such an app or at least terms it speculative.  In any instance, my observations below stand.]   Even to me, this one is creepy.  They’re already defending it by saying the default is “opt out” and that users must explicitly choose to share their pictures and information.  I have so many problems with this approach that I can’t begin to address them all.  But here are just a few:

  • “Informed consent” is only reasonable where the individual involves is making an “informed” decision.  Are people really going to read the fine print before they opt in?  Of course not.  And even if they did, is Google going to manage things in a “do you really want to do this” fashion or are they going to say “great, you agreed, let’s move on and forget about what you’ve really just done here.”  They’ll do nothing to discourage participation.
  • These things are a moving target.  Remember when you signed up for Facebook?  If it was more than a year ago, your privacy options were fairly limited then.  Only under extreme scrutiny and now the threat of governmental intervention has Facebook made its changes and defaults more open and user-friendly.
  • We’re doing things we never thought about when we signed up for a platform.  Facebook at first was about connecting with “friends” and sharing status messages.  We’re now sharing pictures and, even more  intimate, location.  I’ve only friended people on Foursquare (a location-based service) who I care to have know where I happen to be.  I’ve got over a thousand friends on Facebook, some of whom I don’t care to have know where I’ve checked in and where I happen to be.  I’ve set up a group on Facebook called “location OK” and have only included those friends whom I’m comfortable having know where I’m located, and I’ve set my privacy settings on Facebook so that Places check-ins can only be seen by members of that group?  Have you done that?  Do you know anyone else who has done that?  Probably not.  You set up your settings for a use case that may no longer be the case, and haven’t adapted.  This “creeping  incrementalism” has made it easy for you to ignore this stuff.  Managing Facebook and Google is no longer simple.
  • Deep integration.  You have no idea how much information you’re sharing across networks.  Every time you click “allow” to sign in with Facebook or Twitter, you’ve set up a data-sharing arrangement that goes well beyond what you ever intended.  Go look at your Twitter and Facebook settings and see how many people you’ve enabled to have access to your data and credentials.  I’ll bet you don’t even know what half of the things you’ve got in there are.  When I sign in like this, I change their default setting so that the approval is good for one day only.  Of course the default is “until revoked” which is polite language for saying “forever, because you’ll forget about this 10 seconds after you clicked it.”

As I said, I could go on and on.  So what’s going to happen here.  The scariest thing is that this mess has created a situation where the government’s going to step in to help save us.  Yikes!  Grandstanding politicians.  Just what we need here.  What we really need is for someone to create a really great privacy management tool that helps us manage all the complex relationships we’ve established and manage all the information we’re sharing in an easy-to-use, coordinated, centralized fashion.  Apple and Facebook and Google and Amazon are going to fight you at every step.  That leaves you, Microsoft.  Symantec?  Cisco (who needs to boost its consumer initiatives anyhow)?

Someone tell me a legitimate use case for this software, beyond stalking.  “I should know their name but I forgot”?  “They look familiar but I’m too embarrassed to ask”?  If this were anyone but Google (or other big players), I might ignore this app.  But Google?!  Do no evil??  This will be used for evil.

The New York Times Paywall: New Coke?

So, after just retweeting several NY Times stories and thinking “take that, paywall,” I’m left wondering whether there’s a new Coke thing going on.  Does anyone believe it’s possible that the whole paywall thing is actually a bogus plan?

For those of you who don’t know, the New York Times is instituting a paywall whereby you can read a limited number of Times’ stories in any given month but to get more, you have to pay.  There are a few loopholes to the scenario, however.

  • If you’re a subscriber to the dead-tree version of the newspaper (and I am), you have unlimited access via the web or mobile.
  • If you come to an article via a social media link (e.g., Twitter, Facebook), you can access the article without regard to how many other articles you’ve already accessed.

Already there are innovators out there, coming up with ways around the paywall.  One Twitter user set up a feed that Tweeted all of the articles in the Times so that you could find all relevant links in one place.  Others are setting up Facebook groups.  The Times has responded by asking Twitter to take the feed down, although their objection was based on trademark misappropriation (the name included the Times’ name) and not on the basis of its content.  Of course, that’s the Times’s only recourse here.  It will be easy to reconstitute the feed via a defensible (and, I’m sure, highly retweeted) feed.

So, is this part of the Times’s strategy?  They knew the holes existed.  They knew people would exploit them in innovative ways.  So now, people are probably Tweeting Times’ stories way more than before.  I’ll bet their page views go up after the installation of the paywall.  So they’ll get some minor subscription money (from the suckers) but more importantly, they’ll preserve a few dead-tree subscribers (who now think they’re getting a better deal) and they’ll grow their page views because it’s now the forbidden fruit.

 

Are they that smart or devious?

 

 

1:1 Marketing is Wrong

[Quick note:  I'm going to experiment with what I call some short-form blog posts.  Being an analyst, I tend to want to explain my reasoning in depth.  Sometimes, however, I just want to get out a sharply worded position or observation, so I'm going to intersperse my longer pieces with some of these quick hits.  Let me know what you think.]

Some 20 years or so ago, in the early days of the Internet, marketing consultants Don Peppers and Martha Rogers came up with the notion of 1:1 Marketing.  The core proposition behind it is to treat consumers like individuals.  Sounds good, right?  Well, I think it has been a fool’s chase and I can’t begin to imagine how much money has been spent in its pursuit.  And the more data we accumulate, the further we get from being able to realize this “vision.”  What’s wrong with the vision?

  • From a marketer’s perspective, you don’t need to get to 1:1.  Let’s use beer as an example.  What do you need to know?  Probably just my gender and IQ.  To make a gross generalization:
    • If female, then light beer.
    • If male and IQ>93, then imported beer.
    • If male and IQ<93, then Budweiser.
  • From a consumer’s perspective, do you really care to have that close a relationship with your deodorant or your automobile?  At some point, it even gets creepy.  It’s just a deodorant for God’s sake, not a lifestyle expression (unless you use Axe).

Instead of 1:1 marketing, we — both sides of the equation — want sufficiently meaningful differentiation.  I’m not going to ® that term.  It’s not particularly catchy.  But that’s what serves both marketers and customers very well.  We don’t have to drive to deeper and deeper levels of differentiation.  We just need to get to some degree of meaningful differentiation.  Light beer or not?  Import cars or domestic?  Museums or baseball?  As brands drive to get finer and finer, bad things happen:

  • Costs go way up to accumulate and process all the unnecessary data.
  • You slow down your decision-making because you’re considering too many variables.
  • You get further away from what the customer self-identifies as their relevant affiliation.  I’m a Mets fan (I know, I know) and identify as a whole with that group, not an upper-middle class, educated professional with two kids, a dog and, occasionally, a job.  When you differentiate me from the rest of the group on some vague 1:1 notion, you diminish your attractiveness, not enhance it.

As a consumer, I generally identify as part of a tribe.  Identify those meaningful tribes and market to them, not some ridiculous notion of 1:1 that we’ll never achieve and would never deliver on its promise even if we could.  It’s time to say “the emperor has no clothes” to this whole 1:1 marketing thing.  Social media has given it new life.  Stop it now.

Facebook and Amazon Change the Streaming Video Marketplace

The entries of Amazon and Facebook into the streaming video marketplace stand to change the economics and dynamics of watching video online.  While shortcomings and constraints will slow their impact in the near-term, make no mistake about it:  the economics and approaches have changed.

It’s easy to dismiss these solutions in the short-term.  No, Amazon doesn’t have the library of a Netflix.  No, the Facebook experience isn’t optimized for long-form video consumption.  If, however, you dismiss these two based on these shortcomings, you’re missing the point.

Let’s look at Amazon first.  For Amazon, this is a shrewd, and necessary move.  Amazon Prime, which offers free two-day shipping for all Amazon purchases for $79/year, is increasingly irrelevant as Amazon’s book sales move to digital.  By the middle of last year Kindle sales on Amazon surpassed hardcover books, by the four quarter that extended to paperback books as well, and on Christmas day Amazon sold more e-books than physical books combined (although that number may certainly have been skewed by the number of people opening Kindles as presents that day).  Thus, it is clear that Amazon had to do something to enhance the value of Prime for its most valued customers.  Of course, Amazon sells much more than books so Prime still has considerable appeal even for those who consume their books digitally.  Amazon wins either way.  If you get value because of the free shipping offer, the availability of streaming video for no extra cost is a compelling value-add.  And if you’re evaluating the competing streaming video options, Amazon is cheaper than Netflix ($100/year) and offers more than just streaming.  (Here’s an interesting analysis of the customer overlap between Netflix and Amazon.)  What’s most notable about Amazon’s offer:

  • It’s cheaper than the market leader, without any other considerations.
  • It’s bundled with other value, making it appear free to a significant range of customers.

Facebook’s entry is much more limited and complex but longer-term perhaps more impactful.  Much more limited.  A single movie at launch, The Dark Knight (incidentally, one of my 10 favorite movies of all time).  But this one is much more potentially transformational.  So what’s interesting about Facebook’s entry here?

  • While initially a standalone experience (and probably a sub-optimal one at that), given its market position I expect Facebook’s movie-viewing experience to rapidly evolve to a social experience.  From a marketing perspective, that talks to the viral potential.  More importantly, though, from a viewing experience, you could envision how Facebook could leverage its platform to increase the social elements in movie viewing in both synchronous and asynchronous fashions.  For instance, you might not only chat with other friends in real-time while you’re both watching a movie, you might also see the comments from other friends appear at the same point in the movie even if they’re not watching it at the same time.  Facebook can significantly shape the social movie viewing experience in a way that doesn’t exist today.  Twitter leads the real-time synchronous market today (e.g., we all Tweet during the Academy Awards) but the non-real-time and asynchronous markets are very much in play and Facebook can lead the way here.
  • The role of Facebook Credits in paying for movies is very interesting.  I have long been a believer of “count down” models vs. “count up.”  A count-up model is one where you pay for each purchase.  Every transaction counts up the amount of money you’re spending on the particular activity, and thus is an individual purchase decision.  In a count-down model,  you have a pool of credits you can “count down” against.  In your mind, the money is already spent and it’s just about how you’re going to spend the money.  With Facebook Credits, users will have a variety of ways to spend their currency (games, movies, other products and services) and a variety of ways to acquire it (you can even buy gift cards at Target).  This will make it easy to make an impulse buy of a movie (whereas Netflix and Amazon at their price points are considered purchases).

For different reasons, the entrance of Amazon and Facebook into the streaming video marketplace change the landscape.  The net result is that the marketplace has new competitive requirements.

  • Movie viewing alone may not be enough to sell a movie service.
  • The social experience of watching a movie online is in its infancy but is likely to change very quickly.
  • The payment models for video consumption are expanding, and will include:
    • Subscriptions
    • Virtual payments
    • Bundling with other services

Toy Fair 2011: Where Technology is Largely Lacking

I attended Toy Fair 2011 once again (with my friend and one of the smartest people I know, Larry Smith) which filled New York’s Javits Convention Center last week and it was a journey through quieter times.  I was shocked how little cutting-edge technology there was nor tie-ins with mobile devices, cloud services, virtual goods and other ways to extend the reach and impact of traditional “toys.”

I suppose I should have realized things were going to be a little different when I went to pick up my press/analyst badge (for which I had received email confirmation).  “No, you don’t qualify,” I was told on-site.  Instead, they gave me the badge for financial analysts.  I tried to explain the difference between the two but was met with blank, uncaring stares.  I was told, however, that my badge would get me pretty much everywhere the press badge did except the press room (and I didn’t really want to spend time there anyhow).  In retrospect, it was a great advantage.  At times the show floor was pretty barren so if I had a press badge or, even worse, a buyer badge, I’m sure I would have been besieged by booth personnel wanting to tell me about their wares.  But with the red badge I was wearing, no one particularly wanted to talk to me.  (At least I assume it was the red badge.)

Having immersed myself for the last five years in social, mobile and cloud technologies, I was shocked how little of this there was on the show floor.  There were lots and lots of toy blocks, lots and LOTS of stuffed animals (referred to in the trade as “plushes”) but not so many microchips or web connections.  I’ve become accustomed at tech trade shows to 90% of the booths having iPads for demonstration purposes; here, it was more like 4% (no exaggeration).  It was so low-tech, there were some booths who had old traditional CRTs and not flat-screen TVs.  I think the industry is missing HUGE revenue and engagement potential by not only not having toys that contain intelligence but also by not linking them to web sites that add functionality, engagement and further revenue opportunities.

In its story about the show, Time Magazine pulled together an article on the 100 all-”Time” greatest toys.  It’s amazing how consistent themes remain over, um, time.  Clearly this is an industry that doesn’t like change.  Even more, look at what Time picked as the top 10 tech toys they found at the show.  They included:

  • Monopoly Live.  I would characterize this as how not to add technology to a classic.  Gratuitous technology aimed at “appealing to interrupt-driven kids” does not an improvement make.  This approach should die a quick death.
  • Angry Birds.  Yes, if you haven’t had enough of it on your iPad, you can now play the board game.  The video game industry understands the concept of “brand extension.”  Not so the “traditional” manufacturers.
  • A “kid-tough” camera.  With full-featured adult cameras going for under $100, I’m not sure there’s much of a market here.  In fact, I’ll bet most five-year olds can better handle the new generation of touch-screen, feature-rich cameras than can most adults.  Maybe they should repackage these as cameras for seniors.

Three things did catch my attention.

  • The richness of really good scientific experiment kits is wonderful.  As a kid growing up, I was pretty much contained to a microscope and slides.  Kids today have an amazing array of real science kits focused on timely issues like potable water, renewable energy and the like.
  • I don’t remember exactly where in Disney World I saw this for the first time but they have this set-up where you wave your arms and motion-detecting devices sense your movement and turn it into music, varying the pitch and speed with how you wave your arms.  This has now made itself into home-sized and -priced technology.  And at the very low end, you can build your own musical device by just painting a piano.
  • You’re probably already seen ads for the Parrot AR Drone, a flying device that uses the iPad or iPhone to control it.  It makes for great demo though it strikes me as one of those toys where after 10 minutes of using it, you’d get bored.  The gimmick may be better than the reality.  More broadly, though, you’d think the toy manufacturers more broadly would understand the appeal of (a) the iPhone and (b) a device containing accelerometers.  If it’s useful in a phone, surely they can think of ways it would be interesting in a toy.  And price is probably not an issue here.  The componentry is cheap enough.

All in all, Toy Fair was a wonderful retro journey for me but caused me to reflect on how much of mainstream industry still hasn’t understood the power of technology, now available at incredibly low price points.  “Gamification” is a growing trend in technology (“funware,” as my friend Alan Berkson calls it).  Technology is embracing games.  If games/toys don’t embrace technology, there stands to be another industry where the technologists take over and the traditional players get shunted aside.  To their credit, the largest players in the toy industry (e.g., Mattel) seem to be the most advanced with technology.  That’s perhaps not as I’d expect it.  The disruptors should be driving the trend.  Maybe it’s because of the tech savvy required, or the capital investments.  For whatever reason, though, this is a space likely to see a lot of change in the next few years.  Here come the technologists.

Twitter: How do You Monetize Infrastructure?

In case you missed it, there’s a fascinating battle going on over in Twitter-land.  For much of the weekend, some of the Twitter clients from Ubermedia, the leading provider of Twitter clients, were shut down for unspecified violations of Twitter terms of service.  First of all, who is Ubermedia?  Ubermedia delivers Twitter client tools including Echofon and Twidroyd, and just this month they announced the acquisition of Tweetdeck.  The net result is that approximately 20% of Twitter traffic flows through Ubermedia clients.  That’s why this skirmish is so interesting.  Ultimately it’s about who gets to monetize the Twitter platform…and Twitter’s not in the pole position.

Much of my recent conversation here on this blog has related to Apple and the control it exerts over its ecosystem and its ability to extract revenue and profit from the “partners” in the ecosystem.  Give Apple credit.  They figured out how to build an infrastructure and an ecosystem whereby they profit handsomely and where they further profit from the infrastructure investments of others.  Look at what Apple has done to the rest of the wireless industry.  With just 3% of the handsets by volume, Apple is generating 2x the profits of the rest of the handset industry combined.  How do you think AT&T feels about that?  And how excited is Verizon to turn over some of their profitability to Apple?  The carriers are in a desperate struggle to be more than just “dumb pipes,” having ceded value to the platform and client providers like Apple, Google and RIM.

So what does this have to do with Twitter?  For Twitter, the situation is more dire than for the cell phone carriers.  At least the carriers have a direct revenue source for their infrastructure, paid for by the consumer (even while they’re fighting over what portion of the revenues generated should be theirs).  And for many years, their capital expenditures were covered by the fees they were extracting because it’s only recently that the platform providers have exploded onto the scene to compete for ecosystem dollars.  Twitter, by contrast, has no financial relationship with anyone in its ecosystem and has largely funded its infrastructure on its own.  (Well, on the dollars of its venture investors.)

Meanwhile, on the backs of this capital investment and Twitter’s open approach, a whole host of services have emerged on top of and around the core Twitter feed.  This is what makes Twitter interesting.  The raw feed itself is rather overwhelming.  It’s only through all of these third-party tools that Twitter starts to become the invaluable resource that it is to so many of us.  And these are where the monetization opportunities come in.  Google built its multi-billion dollar empire on search, selling keywords next to organic search and delivering contextual advertising via its “clients,” like Gmail and Google Docs.  Similarly, Ubermedia can build quite a nice advertising business via contextual advertising alongside the Tweetstream it delivers via its Twitter clients.  And what does Twitter get?  A hearty pat on the back.  Sure, Twitter can sell advertising too but without the contextual knowledge that comes from the client tools, Twitter’s advertising is as likely to be intrusive as it is to be contextual.

Thus, Twitter fires a shot across the bow of Ubermedia, the company best positioned to compete for the dollars Twitter believes to be rightfully theirs.  Yes, there were trademark infringement issues, which were quickly resolved.  This brouhaha was not about that.  This was about the race to monetize Twitter, a race the core platform provider is falling behind in.

Where will this end up?  I’m sure there are some pretty heated conversations going on between Twitter and Ubermedia.  It’s a delicate dance between the two.  Twitter can’t afford to scare away its ecosystem that makes the infrastructure valuable.  At the same time, punishing their end users is never a good idea, especially such a fickle crowd as tech early adopters.  Twitter’s in a strong position, but it’s not unassailable.  However, Ubermedia also now has a pretty good idea of what it means to be on Twitter’s bad side.  Twitter could put them out of business tomorrow.  Thus, the two parties have the strongest of all possible reasons to figure out how to economically co-exist.  I think in the coming weeks and months we’ll see some joint announcements from the two about their plans to monetize the Twitter platform.  Consider this, then, the first negotiating ploy.  “I own your traffic.”  “Well, I can shut that traffic off.”  There’s a lot at stake here but there’s enough to go around to make both parties happy.

(As an aside, this was another interesting moment for Quora and its position among the tech leadership.  A question about why Twitter shut off Ubermedia garnered responses from Bill Gross, Ubermedia’s CEO, and Matt Graves, Twitter’s communications director, although there’s some doubt as to whether the post really came from Graves.)

UPDATE 2/21:  By the way, fear not for either party.  For those of you who think “I knew Twitter ultimately had no business model,” they still have considerable value for other infrastructure players or those who would like to get into/expand their infrastructure play.  In other words, even without a business model, someone will and should pay billions for them.  The case is a little murkier for Ubermedia.  As my friend and colleague Sean Bohan noted, “you play by the open API, you die by the open API.”  Twitter can continue to encroach on Ubermedia’s space.  Much as I hated it, for a brief period of time over the weekend, I had to move to an alternative Twitter client, and the pain of doing so (i.e., the switching cost) was very low.  But Twitter’s not about to shut off its third party ecosystem.  The damage would be too severe.  And thus, Ubermedia, who has critical mass, is both a target but an important ally.  “Frienemy” at its finest.

Follow

Get every new post delivered to your Inbox.

Join 34 other followers