While Microsoft’s acquisition of LinkedIn is a triumph for the Silicon Valley greater fool model, it shows social media is largely an investor’s graveyard.
“There’s a shared sense of alignment,” says LinkedIn CEO Jeff Weiner during his video with Microsoft’s Satya Nadella to announce Microsoft’s $26 billion dollar acquisition of LinkedIn.
The fact revenues were slowing in the face of anemic returns is probably the reason why LinkedIn’s board was happy to accept Microsoft’s deal that’s 46% more than the social media site’s $17.5bn market capitalisation on Friday.
LinkedIn’s capitulation shows what a graveyard social media sites have been for investors. With the exception of Facebook, almost all have failed to deliver the profits or promise hoped for by those making big bets on the platforms.
Both LinkedIn’s and Twitter’s managements have been distracted by the search for revenue streams to justify their huge stockmarket valuations which in turn has alienated core users. LinkedIn’s surrender means Twitter’s acquisition is only a matter of time.
Microsoft now has to show how it is going to derive twenty-six billion dollars worth of value out of LinkedIn. The company’s track record of acquisitions is execrable as we’ve seen with Nokia, Yammer and Skype and there’s little to indicate this deal will fare any better.
Commentary that LinkedIn as a ‘cloud company’ will help Microsoft Azure against an already rampant AWS is downright silly, Nadella himself in a Bloomberg interview with LinkedIn’s Weiner was at pains to point out the networking service’s fit with the Dynamics product.
Plugging LinkedIn’s ‘social graph’ with Microsoft Dynamics might give the Nadella’s team better tools to compete with Salesforce in the CRM market, it seems a high price to pay and almost justifies Salesforce’s Marc Benioff rejecting Microsoft’s overtures last year.
LinkedIn’s capitulation marks the end of social media’s growth phase. Now, as Facebook becomes the platform that rules all, the others have to find their niches in a market dominated by one services. For Twitter the race is now on to find a buyer.
Miller was a classic social media influencer, with 700 thousand young followers she was popular with advertisers then along came the payday of reposting fake diet pill testimonials.
Miller started to make serious money. She’d already been able to make a little cash: fashion companies and some small Etsy stores paid her to post pictures of clothing on her blog, with a nudge to her followers to check out their sales. She’d earned about $4000 in this way.
But then the big one came along. Two 18-year-old American social media entrepreneurs, Zach Lilley and Jeremy Greenfield – fans and friends of Pizza – approached Jess Miller and other top-performing Tumblr bloggers in April 2014 with a proposition for a money-making scheme. It used a decidedly old-school lure: diet pills.
Lilley, Greenfield and their associate Dennis Hegstad ran a website called Exposely, which connected brands to people with strong followings on social media. Lilley and Greenfield used their social media skills to create diet pill ads that masqueraded as Tumblr posts, essentially fake testimonials from women talking about their weight-loss journey. Miller would re-blog these posts, and get a small payment if the user clicked on the link. If the user bought the pills, Miller would get $23 and Exposely would get $26. She watched the money roll in – to her mother’s PayPal account.
Eventually the breaches their terms of service, not to mention ethics, became too much for Tumblr’s management and they deleted Miller’s blog along with a group of others in the scheme.
Miller’s story illustrates the manipulation that is a big part of the social media influencer industry with behaviour that’s almost certainly illegal and most definitely unethical. It also illustrates the risks of basing an income or business on service where you can be closed down any time.
For Miller, she seems relieved her time of fame is over. Those building their businesses around these platforms may not be so philosophical.
Particularly impressive was mobile sales made over 8o% of the company’s advertising revenue, up from just short of three quarters in the previous years.
For other online services, particularly Google, Facebook’s success on mobile must be galling as they struggle with the shift to smartphones.
How long that growth can continue remains to be seen. For the moment though, Facebook is showing how to make money on the mobile web.
This application is an interesting, and dangerous, development although it shouldn’t be expected that it’s any more accurate than the plethora of ‘guess your age/nationality/star sign’ sites that trawl through Facebook pages.
Guessing your race is something clumsy and obvious but its clear that services like Google, LinkedIn and Facebook have a mass of data on each of their millions of users that enables them to crunch some big numbers and come up with all manner of conclusions.
Some of these will be useful to governments, marketers and businesses and in some cases it may lead to unforeseen consequences.
The truth may lie in the data but if we don’t understand the questions we’re asking, we risk creating a whole new range of problems.
It’s possible to see how a car manufacturer, steel maker or airline runs up a half billion dollars loss. But a social media company?
Twitter has lost its way and a complete change in management is needed. Maybe it’s time to time to turn the company into a user co-operative, at least the subscribers have an idea of how the products works.
Social media influencer campaigns are too focused on happy, positive messages and that is their fatal weakness.
“If you have anything negative to say, please don’t use the hashtag” implored the organiser to her stable of ‘influencers’ ahead of a recent social media campaign.
Like everyone in the PR, marketing and advertising industries, that organiser was desperately keeping a shiny patina on their clients’ brands at a time where they are one tweet away from disaster in today’s world of message obsessed management.
With influencer programs those risks are magnified as marketers co-opt amateurs to promote their clients in return for access and freebies*. Those unpaid posters on Instagram, Twitter and Facebook may be happy to give a positive view to everything but their fans may not be so kind.
Given their clients’ aversion to risk, it’s not unusual to see marketers setting out terms to ‘influencers’ demanding the brand has the right to vet posts – as one telco requested to this site last year – or outright prohibiting anything negative being said about their client.
Happy Shiny People
Perversely, selecting happy shiny people to promote brands on social media while suppressing critical thinking could actually create distrust of brands argues communications consultant Joanne Jacobs who states “this distrust is causedby campaigns of undifferentiated positivity and uncritical thinking.”
A good example of this potential damage is a recent influencer campaign by Chinese telecommunications Huawei where a group of influencers were flown to the 2016 Mobile World Congress to post about their experiences with the brand.
The Facebook post below shows the influencers enjoying the vendor’s hospitality but it also illustrates the lack of diversity in the group, something that was quickly called out in the comments.
For the Huawei influencers who had spent the previous week gushing about the vendor’s products and events this was an opportunity to provide leadership on the lack of diversity in the tech and telco industries..
Instead the critics – some of whom had more influential online audiences than the ‘influencers’ – were dismissed with the passive aggressive accusation of being ‘negative’, the cardinal sin of social media marketing.
For Huawei, there was a real risk their happy shiny influencers clumsy attempts to protect the brand would damage for the company and it was unsurprising the company’s professional PR managers stepped in to defuse the situation which in the hands of amateur ‘brand ambassadors’ threatened to become a self inflicted disaster.
Brittle brands of happiness
Huawei’s experience illustrates a key problem with the happy shiny influencer campaigns in their brittleness when faced with genuine criticism. The happy consumerist gleefully liking Instagram photos of shoes or hamburgers will quickly abandon the product should the brand be perceived as acting dishonestly or unethically.
For those influencers who’ve tied themselves too closely to brands, such a scandal could find their own names tarnished and their hard won audiences and reputation deserting them.
In an age of conversation where critical voices can be heard, the nice shiny facades can easily collapse. The days when the tobacco industry or brands like Coca-Cola could drown out critical voices simply by the weight of their advertising campaigns are long gone.
Struggles with a fragmented media
The struggles for the PR and marketing industries in dealing with today’s fragmented world are not to be underestimated – the old models of broadcast advertising and engaging with journalists and celebrities have lost their effectiveness and the industry is grappling with what works with the new channels.
In a building a brand that will last in today’s media landscape, pandering to shallow thinking consumerists is at best going to be a short term fix. To succeed, building a believable trustworthy name that tolerates dissent, allows complaints and acknowledges informed criticism is much more important and exponentially more valuable.
Shallow thinking and shiny people might have worked for Coca-Cola selling to young baby boomers in 1965 but fifty years later things the critics and deeper thinkers have a voice to. Co-opting those voices will only strengthen the brand.
*Disclaimer: This writer has been on a number of influencer programs and received various degrees of corporate largess including a Huawei smartphone.
Twitter could be condemned by the impossible expectations of investors, founders and shareholders
Poor Twitter. Today’s earnings report showed what everyone knew, its user growth has stalled with the number of active participants – Monthly Active Users as the company calls them – didn’t grow in the last quarter and are only up nine percent on the previous year.
The good news for shareholders is advertising revenue grew 48% with both US and international markets showing strong increases. Despite user growth flatlining the company still remains on track to becoming profitable.
As Farhad Manjoo argues at the New York Times, maybe the service needs to focus on more modest ambitions. The company’s dreams of competing with Facebook or growing like Google are never going to be achieved.
We’ve argued at this blog for a year that Twitter’s management and investors should accept the market’s expectations of the business were too lofty and while there’s no reason the company can’t be profitable, it’s not going to be a massive river of gold like Google.
There’s nothing wrong with being a healthy billion dollar business. The risk for Twitter is the greed and ego of investors, founders and shareholders could condemn the company in trying to meet impossible expectations.
How enthusiastic sports organisations will be in sharing their data and audiences with the social media service remains to be seen.
Sports have been a priority of the social media services in their quest to attract audiences, however unlike television broadcasters Twitter, Google Plus and Facebook have found their cosying up to contests and stars has been less than successful.
It may be statistics are what’s needed to attract fans and certainly Facebook is well placed to be a destination for fans however it is early days for social media and the model that works is yet to be found.
Twitter needs focused management that understands the service if it is to survive
Twitter is in trouble, its share price has fallen 70% in the past two years and the service is not gaining new users. To halt the stagnation, CEO Jack Dorsey is reportedly considering ditching the 140 character limit.
The one most desired feature by Twitter users is the ability to edit their posts, although the New York Times points out this may not be a good thing, another popular change would be for the service to crack down on abusive behaviour.
Stagnant management
It seems however that Twitter’s management can’t make those changes and this is understandable given the company’s executives not understanding how the service is used and their desperate obsession to justifying its stock valuation which, despite falling 70% over the past two years, is still $14 billion.
Justifying that stock valuation with no clear path to monetising the service is a paralysing problem which means other useful changes aren’t being made while the company still embarrassingly cosies up to sports, pop and movie stars in the hope their fame will bring advertiser dollars to the platform.
For Twitter the solution is to accept they aren’t a fourteen billion dollar company which would take the pressure off the executive team to find unsustainable ways to justify that valuation and instead focus management’s efforts on improving the user experience.
Making Twitter useful
To make the service more useful, management has to understand how Twitter is used which means finding experienced and capable leaders who also use the service.
Adding features that allow users to make some changes to tweets and lists would be a start and clamping down on the bullies, trolls and frauds to make it more friendly to new entrants would be a start. Creating an easy way for new users to find useful information would also help engagement and retention.
The most important task though is finding executives who actually use Twitter and have an understanding of social media instead of hiring from the tech, advertising and broadcasting industries without any regard of whether those individuals have ever used the service.
Twitter is a valuable service but it’s dying as management play games. If it is to survive, accepting it isn’t as big as it wants to be and finding leaders who understand why its users find it so useful is essential.
Facebook has another attempt to capture the small business search market
Before the web came along, advertising for the local plumber or hairdresser was just a matter of placing an ad in the local newspaper and a listing in the Yellow Pages. Then the internet and smartphones swamped those channels.
One of the greatest missed opportunities has been small business online advertising. With the demise of phone directories, particularly the Yellow Pages, it’s been hard, time consuming and expensive for smaller traders to cut through the online noise.
This market should have been Google’s for the taking however the local search platform has been drifting for years in the face of company apathy, mindless bureaucracy and silly name changes to fit in with the Google Plus distraction.
While Facebook has been playing in the local business space for a while they are now ramping up another service with a new site for local services search.
TechCrunch reports Facebook are experimenting with the local search function and while it isn’t anywhere near as comprehensive as Google’s at present the rich data the social media service has been able to harvest could well make it a far more useful tool.
If Facebook or Apple does usurp Google, the search engine giant will only have itself to blame for missing the opportunity as it was distracted by loss making ventures while letting potentially lucrative services pass.
The local business search market should be a lucrative opportunity for the business that gets it right. It may well be that all the big tech giants are unable to make this market work.
Just as the late 1950s saw a shift in the western world’s society and economy, we’re now seeing a similar change.
Thought of the day. We’re in at point of change in social and consumer behaviour similar to that of the late 1950s.
Sixty years ago the drivers were; the first baby boomers entering their teenage years, the rise of television, an era of accessible and cheap energy, along with rising incomes from the post World War II reconstruction.
Today the drivers are; the baby boomers entering retirement, the rise of the internet, an era of abundant and easily accessible data, the rise of the internet along with stagnant living standards following the late 20th Century credit orgy.
With a distracted CEO juggling the Initial Public Offering of his other business, it’s hard to see how Twitter is going to get the focused management and supervision it desperately needs to maintain its valuation.
