linkedin | Paul Wallbank - Communications Professional

The smell of social media defeat

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.

Weiner has been trying to reinvent LinkedIn’s business model for three years and Microsoft’s acquisition is an admission of defeat with the company’s market capitalisation half of what it was a year ago and profits proving hard to find.

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.

Building the closed internet

Social media services like Facebook and LinkedIn are building API walled gardens that will change how online services work

One of the great strengths of the social and cloud business model was the idea of the open API, recent moves by Twitter and LinkedIn show that era might be coming to an end.

This week Nick Halstead, the founder and CEO of business intelligence service Datasift, bemoaned his company’s failure to negotiate an API access agreement with Twitter that restricts their ability to deliver insights to customers.

Earlier this year LinkedIn announced they would be restricting API access to all but “partnership integrations that we believe provide the most value to our members, developers and business.”

Monetizing APIs

Increasingly social media and web services companies are seeing access to APIs as being a revenue opportunity – something many of them are struggling to find – or as a way of building ‘strategic partnerships’ that will create their own walled gardens on the internet.

For developers this is irritating and for users it restricts the services and applications available but it may turn out to backfire on companies like LinkedIn and Twitter as closing down APIs opens opportunities for new platforms.

A few years ago industry pundits, like this blog, proclaimed open APIs will be a competitive advantage for online services. Now we’re about to find out how true that is.

One thing is for sure; many of the companies proclaiming their support for the ‘open internet’ are less free when it comes to allowing access to their own data.

Social media’s fatal attraction

Social media’s desperate struggle to revive the dying business model of print advertising.

The story of Whisper and the betrayal of its users continues to roll on, but the real problem is the way social media services are desperately trying to recreate the dead business model of print advertising.

Whisper’s problems with The Guardian continue as the company tries to salvage its reputation but the irony for the service is that it was trying to shoehorn its business to fit the print publishing model that the internet started to erode twenty years ago.

It’s not just Whisper; almost every social media business from Facebook to Twitter wants to be an advertiser funded publishing company, just like the newspapers of thirty years ago.

A few weeks ago I wrote about LinkedIn’s pretensions of becoming a publishing platform and this week Forbes tells of Pinterest’s adventures at the Cannes advertising festival as it sells its marketing services.

Every social media service has some sort of angle that harks back to the golden age of newspaper publishing where print advertising was a deep river of gold. Most of them want to become publishers themselves.

It would be hard to think of a service less suited to being a media company than Whisper; but then there’s Yelp whose main business of reviewing eating houses and bars seems to be totally at odds with newspapers of yore.

On the Salesforce PayPal Media panel last week, Yelp! Founder Jeremy Stoppelman was asked if he saw the restaurant review site as being a media company, his response was “sure, it’s a blogging platform.”

So we have new media aping the old media business models where these platforms try to lock users into information silos; in the same way that a London Times reader would never buy the Sun.

The problem with that is the internet broke down the geographic barriers and today a Sun reader in London can just easily find celebrity gossip on TMZ and the broadsheet reader might find more thoughtful analysis in the New York Times.

Certainly someone browsing the web for restaurant reviews might find a better site than Yelp while a bride researching wedding dresses could just as easily find ideas on Facebook as much as Pinterest.

In reality, social media sites have nothing of the stickiness of the old fashioned newspapers in the days before the internet.

Of the social media services it might be that Facebook is the best placed to succeed as an old media publishing service with its advertising smarts pushing messages to its diverse and deep user base but that isn’t certain given the widespread user dissatisfaction with its news feed.

For the social media services much of the problem – -particularly for Facebook – lies in their contradictory aims; they are trying to be identity services, buying platforms, publishing services and advertisers.

For publishers that balance between content and advertising was always a delicate one; and one that shifted over time. For online services that balance is far more complex and the future far less certain.

One thing that is clear Is those contradictory aims aren’t going to be easy to reconcile and the quandary may prove to be insurmountable.

What’s clear though are the advertising models of the future are still waiting for a David Sarnoff moment.

Ello, Ello to a frustrated social media market

The rapid rise of upstart social media service Ello is a warning to the industry’s incumbents and the marketers using the platforms

Over the last week new social media service Ello has been in the news as the ‘anti-Facebook’ that doesn’t collect user details or push advertising onto feeds.

Certainly Ello has touched the zeitgeist with reports claiming the service is getting 30,000 new signups every hour. It’s clear social media users aren’t happy with the existing services.

Part of this discontent is due to social media’s growing pains as the platforms search for the business models to justify their massive valuations, with the consequence of users finding their streams being polluted with invasive and often irrelevant advertisements.

Social dilemmas

For Facebook in particular this is a problem as they have to balance the service’s relevance to users against the demands of ever desperate advertisers who want to post as many ads as possible into the feeds.

Adding to the discontent is suspicions on how the existing social media services intend to trade users’ information. While many internet mavens may claim ‘privacy is dead’, most people are concerned at how a history of their likes, friends or conversations could hurt future relationships or job prospects.

Which ties into Ello’s manifesto.

Your social network is owned by advertisers.

Every post you share, every friend you make, and every link you follow is tracked, recorded, and converted into data. Advertisers buy your data so they can show you more ads. You are the product that’s bought and sold.

We believe there is a better way. We believe in audacity. We believe in beauty, simplicity, and transparency. We believe that the people who make things and the people who use them should be in partnership.

We believe a social network can be a tool for empowerment. Not a tool to deceive, coerce, and manipulate — but a place to connect, create, and celebrate life.

You are not a product.

While Ello’s founders are right that Facebook, and to a lesser degree, Twitter are advertising platforms at present it may well be that social media’s days as a marketing tool are numbered as the business models mature.

The evolving social media model

Facebook’s announcement that it is going into the payments field is an indication that the businesses are maturing beyond the broadcast advertising model that worked so well for television and radio while Twitter’s struggles to shoehorn the old marketing tools into its business continue.

The most successful social media platform to date is LinkedIn which makes less than a quarter of its revenues from advertising — down from 30% two years ago — with the company building revenues in its corporate talent finding services, something that makes LinkedIn’s ambitions to be a global content publisher somewhat strange.

So it may well be that Ello aims to solve a problem that may not exist in the near future.

Ello could turn out to be the ‘Facebook killer’ however the odds are stacked against it, what is clear though is the social media marketplace is telling the industry’s leaders that consumers aren’t happy. It’s something the marketers staking their future on social media need to keep in mind.

Social Media’s difficult adolescence

Social media is struggling with its identity as it enters adolescence.

Like teenagers, social media platforms are struggling to understand their position in the world.

For the last week I’ve been dipping into the Sydney sessions of Social Media Week and what’s quite clear from the panels and keynotes is the industry and the services themselves are struggling to find how they fit into society.

Two weeks ago LinkedIn’s senior management were in Sydney describing their ambition to be a global publishing platform, something that’s at odds with the company’s success in becoming the dominant professional social network.

Compounding the feeling of confusion about what LinkedIn is, CEO Jeff Weiner followed up with a discussion of how the service had an ethical crisis over its entry into the Chinese market.

A conflict of interest

During the Social Media Week sessions panellists and the audiences agonised over their struggles to engage audiences or how social media services, particularly Facebook, were limiting their reach.

Facebook has a particular problem; its users want to know about their friends, families and interests while not really caring about brands but its advertisers – the people who pay the bills – desperately want to embed themselves into their followers’ lives.

So Facebook has to throttle back the amount of brand content and marketing material to prevent users being irritated by excessive advertising. Understandably advertisers get upset with this, although its hard to feel much sympathy for businesses and agencies who thought they had a free broadcasting channel in the social media platforms.

Twitter and every other social media platform is suffering similar problems, albeit without the revenues and stock market valuation.

An even more stark illustration of social media’s immaturity is the industry’s reaction to privacy with, at best, a shrug about concerns over the handling of users’ information – this is something that will almost certainly damage the industry in coming years.

One of the problems for the social media industry could be that its overvalued and overhyped; while there’s no doubt a valid role for the services in modern life most of the companies won’t turn out to be as valuable as they and their investors hope.

Startstruck platforms

Part of that quest to increase value results in probably the saddest adolescent aspect of social media: The need to be liked by the cool kids.

Like a lonely teenager, social media platforms are often starstruck; LinkedIn has gone through its phase of being in the thrall of high profile influencers for its publishing function, Twitter desperately courts celebrities and Google Plus in its fawning towards music stars, all of whom seemed exempt from the real name policies that caused so much grief for the company and its users a few years back.

For the social media industry, adolescence is a tough time with many struggles about its own identity similar to those of its users. It will be interesting to see how it matures.

Jeff Weiner and LinkedIn’s Chinese cultural struggle

LinkedIn’s move into China challenges the company’s values and its ambitions to be a content publishing platform

LinkedIn CEO Jeff Weiner believes the company’s culture and values are one of its most important competitive advantages, however moving into China has tested those strengths he told a conference in Sydney two weeks ago.

During the fireside chat Weiner went over the company’s development, the challenges he faced taking over from LinkedIn founder Reid Hoffman as CEO and the importance of the company’s ethical base.

“It’s important for companies to define what culture and values mean to them before they get to what the specific values and culture are,” Weiner said in an answer to an audience question.

Defining values and culture

“At LinkedIn we think culture is the collective personality of our organisation and it’s not only who we are but who we aspire to be and that aspirational component is really important,” Weiner continued.

“Oftentimes you’ll see company executives get onstage to introduce culture and values or talk about changing culture and values and it’s not necessarily something the company already does and it loses the trust of the employees and the audience when that material being presented because people know is not necessarily true.

“If you allow yourself to include this aspirational dimension when defining the culture it gives everyone an opportunity to play up to where your setting that bar and I think that’s important,” stated Weiner.

“Values are the first principles upon which we make day to day operating decisions, that’s how we make the distinction.”

Culture as a competitive advantage

“I think once an organisation has defined for itself what it means by culture and values it’s then obviously important to codify its culture and the pillars of the culture and the specific values that it operates with.

“Its not enough to codify it, we went to the trouble of defining it and then putting it in our public registration when we filed to go public and that’s a good start but all too often we see people talking the talk with regard to culture and values and not walking the walk.”

For Weiner, that commitment to the company’s culture is the company’s strength in the marketplace: “Today, I’ll tell you it’s our most important competitive advantage.”

The China Problem

LinkedIn’s culture though has been tested by its entry into the Chinese market where its aspirations of being a content publisher met the limitations of the country’s censors.

When asked by this writer about the quandary LinkedIn finds itself in the PRC, Weiner reconciled this with the company’s mission to connect the world’s professionals.

“China’s one of our largest opportunities in terms of the value we can create for members in China and for companies in China.”

“One in five knowledge workers and students reside in China so it’s a huge part of connecting the world’s professionals and to achieve that kind of scale so we can create value for people who are living in China it’s important that we’re able to do business there.”

“At times means complying with law that forces us to do things that are very challenging and difficult and we always knew the importance of operating in China and for us we wanted to be extremely thoughtful in terms of how we did that.”

Favoring freedom of expression

“Obviously we are very much against the idea of censorship and very much in favor of freedom of expression but in terms of operating there and creating economic opportunities for what could be potentially a 144 million people from time to time we may have to make some very difficult decisions. That’s the reality of doing business there.”

In being asked if this creates a struggle with the company’s culture, Weiner answered “that was one of the things we took so much time on.”

“From the time we decided we needed to be in China and how important it would be in creating the global platform and adding value for members and the time we entered into China with the local language version of the site it was of the order of 18 to 24 months.”

“Discussions took place among our executives asking some very difficult questions in terms of our culture, our values and where we would be willing to compromise and where we would draw hard and fast lines and that will continue to be an ongoing process.”

For LinkedIn and Jeff Weiner the challenge of being a trusted global publishing platform and a leader in the Chinese market raises some serious ethical questions; it’s a challenge that is going to test the company more in coming years.

Has the social media bubble popped?

Poor LinkedIn and Twitter earnings could be marking the end of the social media bubble

Last week Facebook’s stock soared after the company reported better than expected earnings on its advertising services.

It seemed that the social media sites had finally cracked the code on how to make money out of their billions of enthusiastic users.

This week sees a different story as both Twitter and LinkedIn disappointed investors with missed revenues targets in their quarterly earnings reports.

Twitter’s blues

For Twitter the market reaction was merciless – the stock price dropped 24% – as a $500 million loss in it’s first quarter of trading on the stock market is not a good look.

In Twitter’s defense, all of that loss was due to the cost of acquisitions being booked by the company. In 2013 the social media site spent over $500 million buying out various advertising, curation and and analytics services.

The question now for Twitter is whether they can weld together a profitable platform from the collections of businesses they’ve acquired and start delivering a return to investors.

A miss for LinkedIn

LinkedIn has a similar bent towards acquisitions having announced its purchase of data analytics company Bright on the same day as its disappointing results, however the company’s undershooting expectations was because of lower than expected revenues.

‘Disappointing’ is an interesting word in the context of LinkedIn as revenues were up 47% over the previous year.

What possibly should have been more concerning for analysts than the headline revenue number are Linkedin’s soaring costs of doing business – both sales & marketing and product development costs were up 50% year on year – which cut profits by over two thirds.

The most worrying part of LinkedIn’s earnings miss is the company’s price to earnings ratio. Currently the stock trades at an eye-watering P/E of 1,000 which implies investors are expecting a lot more revenue into the business.

Over-inflated expectations

It’s hard to argue that social media stocks aren’t in a bubble with those multiples. Even Facebook trades a hefty one hundred times earnings despite its improved revenues.

Perhaps the simple fact is we’re expecting too much from social media services; they are good businesses, but maybe they’ll never be the fantastic profit machines that Apple, Google or Microsoft have been.

Links of the day 14 May 2012

Some great links over the weekend ranging from the future of media and big box stores to a great, quirky clip promoting Scandanavia as a place to do business.

22 Michaels on an amazing presentation on why you should do business in Stockholm. It’s a shame more government agencies can’t do shows like this.

MIT’s Center for Civic Media writes up a discussion by the boss of Google News. I give this more of a write up in Grappling with Online Media.

Scamworld. Not only is The Verge’s expose of the online get rich quick community a great read, it’s also shows one of the future media models.

Business Insider has the real story why the tale of LinkedIn buying employment site Monster was made up. This is great example of how merchant banks try to create a market for flogging client assets. The managers of Football players do exactly the same thing.

Is there money in Big Data? MIT’s Technology Review doesn’t seem to think so.

Ending the era of the megastore. The Fiscal Times on how Wal-Mart is re-inventing itself.

Tomorrow’s blog looks at phishing scams and how social media is helping the more targeted “spear phishing”.

Inflating titles, inflated apirations

How job title inflation can affect an organisation

This story first appeared in Smart Company on 19 April 2012.

“She listed her job on LinkedIn as my ghostwriter,” reflected the journalist about his publishing business’ Gen-Y staff member.

The journalist’s lament reflects an unexpected corporate risk in social media; that of employees giving themselves grandiose and sometimes damaging job profiles.

Over the last 20 years, title inflation has been rife in the business world as corporations and government agencies doled out grandiose titles to soothe the egos of fragile management egos.

So it isn’t surprising that many of us succumb to the temptation to give ourselves a grand title online.

In the journo’s case a young graduate working as an editor in his publishing business listed herself as his ghostwriter, risking a huge dent to his credibility among other the lizards at the pub or the Quill Awards.

That business journalist is not alone, in the connected economy what would have been a quaint title on a business card or nameplate is now being advertised to the world.

Making matters worse, we now have tools like LinkedIn and other social media sites to check out a business’ background and who are the key contacts in an organisation.

So what your staff call themselves is now important. It can confuse customers, cause internal staff problems (“how come he’s an Executive Group General Manager?”), damage business reputations and quite often put an unexpected workload on a relatively junior employee.

In your social media policy – which is now essential in any business that employs staff – you need to clarify what titles your people can bestow upon themselves.

As well as making this clear to new staff, a regular web search on your business that includes all of the popular social media sites should be a regular task.

Just as economic inflation can hurt your business, so too can uncontrolled title inflation. Watch it isn’t affecting your operations.

You hold us harmless

How the terms of social media sites risk your assets and their business

Social media site Pinterest was recently caught in one of the ongoing quandaries of social media – the ownership of content.

The subject is tricky; social media sites rely on a vibrant community of users posting news and interesting things for their online friends.

Unfortunately many of things social media users post are someone else’s property, so almost every service has a boilerplate legal indemnity term like Pinterest’s.

You agree to defend, indemnify, and hold Cold Brew Labs, its officers, directors, employees and agents, harmless from and against any claims, liabilities, damages, losses, and expenses, including, without limitation, reasonable legal and accounting fees, arising out of or in any way connected with (i) your access to or use of the Site, Application, Services or Site Content, (ii) your Member Content, or (iii) your violation of these Terms.

Facebook have similar terms (clause 15.1) as do LinkedIn (clause 2.E) and Tumblr (clause 15). Interestingly, Google’s master terms of service only holds businesses liable for the company’s legal costs, not individuals.

Boilerplate terms like these are necessary to provide at least an illusion of legal protections for investors – those venture capital investors, greater fool buyers or punters jumping into the latest hot technology stock offering need a fig leaf that covers the real risk of being sued for copyright infringement by one of their users.

The risk in these terms shouldn’t be understated; by agreeing to them a user assumes the liability of any costs the service incurs from the user’s posts. Those costs don’t have to be a successful lawsuit against the service, it could be something as minor as responding to a lawyer’s nastygram or DMCA takedown notice.

Of course, none of the major social media platforms have any intention of using these indemnity terms; they know that the first time they go after a user all trust in the service will evaporate and their business collapse.

Somewhere among the thousands of social media services though there is going to be one that will pull this stunt. Strapped for cash and slapped with an outrageous claim for copyright damages, the company’s board will settle then send out their own demands to the users responsible.

Those “responsible” users – probably white, middle class folk sitting in somewhere in the US Midwest, South East England or North Island of New Zealand – will be baffled by the legal demand that requires them to file a defense somewhere obscure in California or Texas and will go to their lawyer friends.

When the lawyers tell them what it means their next step will be to their local news outlet.

The moment the story of a middle class person facing losing all their assets hits the wires is the moment the entire social media business model starts to wobble.

In many ways what the social media sites are trying to do is offset risk.

Risk though is like toothpaste. Squeeze the tube in one place and the pressure moves elsewhere.

By laying off a real risk by using legal terms the social media sites create new, even bigger risks elsewhere in their business.

The dumb thing is these terms really don’t protect the services anyway – it’s unlikely the typical social media user will have anything like the assets to cover the costs of a major copyright action by a rich, determined plaintiff.

It’s going to be interesting to see how many services still have these indemnity clauses in 12 months.

For the industry’s sake, the big players will need to have ditched these terms before that first dumb attempt to claim damages from users hits the wires.