Category: economy

Is the social media business model dying?

Have the social media companies reached their peak?

Is the social media business model dead?

The frenzied rush to release new features such as Facebook’s latest changes, along with Google’s updates to their Plus platform, may be the first indication the big social media business model is broken.

Driving the adoption of social media services has been the value they add to people’s lives; MySpace was a great place to share interests like bands and music, Facebook’s is to hear what was happening with their families and friends, LinkedIn is for displaying our professional background and Twitter keeps track on what’s happening in the world.

Now the social media services want to be something else, Facebook wants to become “a platform for human storytelling” where you’ll share your story with friends and friends of friends (not to mention the friends of your mad cousin in Milwaukee) while Google+ wants to become an “identity service”.

The fundamental problem for social media services is their sky high valuations require them squeezing more information and value out of time poor users by adding the features on other platforms; so Facebook tries to become Twitter while Google+ desperately tries to ape Facebook and Quora.

Adopting other services’ features is not necessarily what the users want or need; you may be happy to follow a Reuters or New York Times journalist on Twitter for breaking news but you, and them, are probably not particularly keen on being Facebook friends or professionally associated on LinkedIn.

If it turns out we don’t want to share a timeline of our lives with the entire world but just know how our relatives or old school friends in another city are doing, then the underpinnings of the social media giants value may not be worth the billions of dollars we currently believe.

This isn’t to say social media services themselves aren’t going away, it could just be that the grandiose dreams of the online tycoons where they become an identity service or a mini-Internet are just a classic case of overreach.

For Google and Salesforce, whose core businesses aren’t in social media, this could be merely an expensive distraction, but for those businesses like Facebook it could be that Myspace’s failure was the indicator that making money out of people’s friendships isn’t quite the money maker some people think.

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Trusting online reviews

How do we spot fake reviews on sites like Tripadvisor, Yelp! and Eatability

Review sites where customers can post their experiences are changing consumer behaviour and bringing a new level of accountability to businesses, but how do we trust the comments on which appear online?

Travel review site Tripadvisor is a good example of how consumers are able to spread the word about their good and bad business experiences, much to the displeasure of the UK hotel industry and its media friends. To make things worse, many of those reviews are further spread by social media services like Twitter and Facebook.

While the travel industry complains about fake reviews from competitors and disaffected customers, the majority of fake reviews are from hoteliers themselves pumping up their own business. It’s always interesting how many gushing reviews are from anonymous posters with only one or two reviews to their name.

Should any of the threatened court cases actually make it before a judge, there may be a few hoteliers finding themselves in an uncomfortable position, a classic case of being careful about what you wish for.

That’s not to say Tripadvisor doesn’t have a problem, the comments in a recent Telegraph story about the service show they have the web 2.0 problem of lousy customer support which comes from a low cost, user generated business model.

A more serious point which is overlooked by most of the critics is that Tripadvisor, like most travel sites, is linked to certain booking services. If you attempt to use the site to book a property that isn’t aligned with the site, it may well falsely report there are “no rooms available”, which is deceptive and will almost certainly fall foul of competition laws in most countries.

For users of sites, it means we have to be careful with what the reviews and the sites themselves tell us. So what should we watch for?

Spotting dodgy reviews

The obvious thing is the planted review. The easiest way to spot this is by the number of reviews submitted by the commenter.

If a commenter only has one or two reviews then it’s almost certain they either have an axe to grind or they have been submitted by the establishment or it’s staff as most rational people don’t have the energy or time to build a comprehensive profile of reviews just to shaft one place.

Another useful tactic is to look at the reviews around it, do others disagree with that reviewer or are they consistent? Outlier bad reviews can indicate a plant, a grudge or simply a bad day in the kitchen.

Dealing with bad reviews

As we’ve pointed out before, consistent bad reviews on these sites usually indicate a structural problem in the business however if you suspect a fake or planted review, most services have a “flag as inappropriate” option or a dispute mechanism.

Be careful using these however as flagging a legitimate complaint as malicious or fake may antagonise the poster and give the poor review more publicity than you would like.

The social aspects of the web, such as review sites and social media services like Twitter and Facebook, are going to become more important over the next few years as internet users use them to help sift through the massive amount of information on the net.

All businesses, whether in hospitality or other industries, need to take these sites and the reviews on them seriously.

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How Google’s identity obsession hurts

How the search engine giant is damaging business and its own reputation

Imagine giving a presentation at a conference where you fire up a live demonstration of a product you’ve been urging the audience to use and the audience start giggling.

You turn around to find a bright red message at the top of the screen stating your account has been suspended. It wasn’t there the night before and you certainly didn’t receive an email warning you this had happened.

Embarrassing or what?

That happened to me with Google Local earlier this and the many stories like it illustrates a serious management problem within the world’s biggest search engine company.

Local search – where businesses can be found online based on their location – is one of the main web battlefields with Google and Facebook, along with outliers like News Limited and Microsoft, are competing to get business of all sizes to sign up.

Recently though Google seems to be going out of its way to squander the massive opportunity they have in this sector despite the CEO, Larry Page, identifying local services as one of their priorities.

Despite Google’s intention to promote Places – as their, and Facebook’s, local search platforms are called – many businesses are finding the company’s arbitrary and often incorrect application of its own rules and Terms of Service difficult to understand and use.

“I have found that with the ‘moving target’ Google is presenting to businesses” said Bob, a commenter on one of my blogs, “is paralyzing them from doing exactly what Google wants, which is updating and providing fresh content on their listings pages.”

In many ways, this is a small front on the “nymwars” that has broken out since Google introduced their Plus social media service and started enforcing their “rules” on “real names”.

Unfortunately their real names “policy” – and I use inverted commas deliberately – is vague and arbitrary with users finding their accounts suspended despite signing up with “the name your friends, family or co-workers usually call you” as required by Google.

Account suspensions are wide and varied; some people, quite legally, have a name without a surname, others have a combination of languages such as Chinese or Arabic, while others have simply fallen foul of the computer and Google’s secretive bureaucratic culture.

This secretive bureaucracy would be funny if it wasn’t so downright hypocritical. Any correspondence with Google about account suspensions either on Places or Plus is signed off by an anonymous functionary from “no-reply” email address. So it appears real identities, and accountability, don’t extend to the company itself.

Last week at the Edinburgh International TV Festival, Google’s chairman Eric Schmidt, announced Plus is not a social media platform, but an “identity service”. Good luck with that, Eric as your staff’s arbitrary and often incorrect interpretation of the company’s own rules doesn’t engender confidence in any identity verified by Google.

That announcement by Google’s chairman should worry investors, as this is a company that is first and foremost an advertising company powered by the best web search technology.

Management distractions such as becoming an “identity service” or buying a handset manufacturer distract focus from the core business and result in the mess we’re seeing around business and private accounts.

For the moment, Google Places remains a service that businesses must list on given the visibility the results have when customers search the web for local services and products.

If you aren’t already on Google Places, do sign up but make sure you get your listing right first time as editing your profile once it’s up risks your account being suspended or cast into “pending” purgatory.

Should you have already an account, leave it alone as any change risks coming the attention of Google’s anonymous bureaucrats.

Hopefully, this madness will pass and Google will clarify their policies, ground them in the real world then enforce their terms fairly and consistently. Until then, you can’t afford to rely on your personal and business Google accounts.

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Microsoft’s lost decade

Ten years ago Windows XP was released by an untouchable Microsoft. What happened next is a lesson for all businesses.

Amid the discussion of Steve Jobs standing down as Apple CEO last week, a quiet milestone was passed. Ten years ago last Wednesday, Microsoft released to manufacturers their latest operating system, Windows XP.

Windows XP turned out to be the most successful computer operating system ever and probably marked the peak of the personal computer era.

The glitz and glamour of the Windows XP launch showed the power of Microsoft at the time – their products dominated the desktop markets, Apple were crawling their way back to profitability and relevance with the iMac while mobile phones were barely capable of sending anything more than SMS messages.

In 2001 the business model of Microsoft was built upon the perpetual upgrade cycle, as computers were expected to last three to five years which would then be replaced by new systems requiring an updated operating system with the latest office software.

Ensuring maximum revenue from the upgrade cycle, Microsoft encouraged retailers to sell XP systems with bundled software locked to the individual computer, these “deals” made sure users would have to buy new programs when the existing machines were replaced.

The three year upgrade coupled with the need to buy new software every time made Microsoft’s model seemingly unstoppable in 2001, but problems were already developing for this strategy.

A major part of breaking the “upgrade every few years” mentality was the late running of Longhorn, Windows XP’s successor, which was released as Vista three years behind schedule and the product’s poor quality meant customers were reluctant to upgrade.

Unfortunately the market rejection of Vista and the wait for the next version of Windows saw the rise of reliable and affordable cloud based services, that ran on web browsers which made the need to upgrade less pressing. Today many people are quite happily running seven and eight year old computers that meet their needs adequately.

It would be foolish to write Microsoft completely as their revenue is still strong and in the past they have seen off major threats like Netscape and the web in 1995 and the rise of cheap Linux based netbooks in 2007. Google’s takeover of Motorola and HP’s abandonment of WebOS may open new opportunities for Microsoft on tablets and mobile phones.

For businesses, the immediate lesson is to look closely at upgrading options however for managers and owners there’s a much bigger lesson when looking at how Microsoft lost its way in the last decade despite a seemingly untouchable and lucrative business model.

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Greater fools and lesser fools

Is the Silicon Valley, venture capital funded business model right for your venture?

As Groupon struggles to get its public offering to the market and the startup mania continues in the tech sector, it’s worthwhile having a look at what underpins the modern Silicon Valley business model along with it’s limitations and risks for those who want to imitate it or invest in it.

Distilled to the basics, the aim of the venture capital funded startup is to earn a profitable exit for the founders and investors. While there’s some exceptions – Apple and Google being two of the most notable – most of these businesses are not intended to be profitable or even sustainable, they are intended to be dressed up and sold onto someone else.

This can be seen in what many of these companies spend investors’ money on; in an example where a startup receives 10 million dollars VC investment, we may see a million spent on developing the product, five million allocated customer acquisition and four million on PR. The numbers may vary, but the proportions indicate the investors’ and management priorities.

Focussing on PR and customer acquisition is essential to attract buyers, the public relations spend is to place stories in the business media and trade press about the hot new business and spending millions buying in customers backs the narrative of how great this business is. By creating enough hype about a fast growing enterprise, the plan is prospective buyers will come knocking.

But who buys many of these business? In some cases a company like Microsoft or Google may buy the startup just to get the talents of some smart developers or entrepreneurs, but in many cases it’s fools being parted from their money.

Greater Fools

The greater fool model the core tech start up model; two guys set up a business with some basic funding from their immediate circle; the friends, family and other fools. A VC gets involved, makes an investment and markets the company as described above.

With enough hype, the business comes to the attention of a big corporation whose managers are hypnotised by the growth story and possibly feel threatened by the new industry or have a Fear Of Missing Out on the new hot, sector.

Eventually the big business buys the little guys for a large sum, meeting the aim of the founders and venture capital investors. The buyer then steadily runs down the acquired business as management finds they don’t understand it and find it a small, irritating distraction from their main business activity.

While there are hundreds of examples of this in the tech sector, the funny thing is the biggest examples are in the media industry with Time Warner’s purchase of AOL and News Corporation of MySpace.

Lesser Fools

As a bubble develops we start seeing the Initial Public Offering arrive and this is where the lesser fools step in.

The mums and dad, the retiree, German dentists, the investment funds and all the other players of the stock market are offered a slice of the hot new business.

Usually the results are interesting; the IPO is often underpriced which sees a massive profit for the initial shareholders and underwriters in the first few days then a steady decline in the stock price as the pie in the sky valuations and the realities of the underlying business’ profitability become apparent.

Steve Blank, a Silicon Valley investor and entrepreneur, put the greater or lesser fool scenario well in a recent article asking Are You The Fool At The Table? Sadly too many small and big investors, along with big corporations, are the fools at the table ignoring Warren Buffet’s advice on avoiding businesses you don’t understand and finding themselves the patsies that the Silicon Valley startup model relies upon.

The fundamental misunderstanding of the venture capital driven Silicon Valley model of building businesses is dangerous as our governments and investment mangers are seduced by the glamorous, big money deals. It’s also understandable funding from banks and other traditional sources is difficult to find.

An obsession with this method of growing businesses means that long term ventures with profitable underlying products and services are overlooked as investors flock to the latest shiny startup. That’s a shame and something our economy, and investment portfolios, can’t really afford in volatile times.

For business owners, the venture capital model might be a good option if your aim is a quick, profitable sale to a fool. If your driving reasons for running a business are something different, then maybe the Silicon Valley way of doing business isn’t for you.

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Choices

In a time of change, hiding from the choices is not the best option.

“It’s too hard to keep up with all the choices. I can’t decide whether to use Facebook or Twitter, Microsoft or Google, Dell or Apple? Doing business today is just too complex…”

Maybe it’s true we have too many choices but yesterday’s business people had plenty of hard decisions to make.

Business people a hundred years ago had to choose between steam, gas or electrical power. If  they chose the latter, there was another decision between AC and DC electricity.

There was a further choice between keeping your horse drawn cart or buying one of those new fangled motor vehicles, which could either run on kerosine or steam.

So our great great grandparent’s weren’t easier and, unlike the relatively small investments we can make in technology today, their choices could easily bankrupt them if they made the wrong decision.

When we’re fretting over choices at least those on offer aren’t the simple alternative of whether we send our children down the mine or to the mill at the earliest possible age.

Instead of worrying about the choices, it’s time to get informed and understand what the alternatives mean. The time to worry is when our competitors, or the market, is leaving us behind because we didn’t care enough to find out what was happening around us.

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So you want a freebie?

If you want something for free, you’ll need to ask nicely. Here’s some tips on making a polite request.

It’s human nature to want something for free and in these days where consumers and businesses don’t expect to pay for information and skills it often doesn’t seem unreasonable to think contributors to your project – be it an event, publication or a start up business – wouldn’t be prepared to do help for free.

That might be how it seems, but you’re asking someone to contribute their most valuable and scarce asset, their time. So what should you be doing to make it easier for someone to donate their time to your project?

What’s in it for the giver?

Your cause could be great or you could be offering some great exposure, either way you need to make the proposition compelling to those you want to do a freebie.

Keep in mind if you’re an employee of a industry group, university or private business and you’re expecting others to donate their time for free. If your organisation is such a noble enterprise, why aren’t you and your managers donating time?

Be prepared for rejection

People have a right to value their time and skills and may be offended at a request for doing something gratis. Unfortunately that’s something you’ll have to deal with as the cost of asking for a free service.

Just be thankful you aren’t asking author and scriptwriter Harlan Ellison for some work or permission to use some of his work.

Tell the truth

Respect those you’re asking to contribute by being up front about your event and the other speakers. It’s absolutely unforgivable to lie about your project when you expect people to donate their time and skills.

Be discrete

If someone agrees to participate for free, don’t blurt it to the entire world. That person has made a donation to your project and they deserve respect.

For a professional, particularly speakers and writers, that lack of discretion could cost them money for future event fees and devalue their brand. Show respect.

Don’t nickel and dime people

Again, those who agree to do something for free deserve your respect. Don’t screw them around on parking fees, taxi, or trivial charges, they’ve done you a favour and the least you can do is make it easier for them to get there and home, even if you are too darned cheap to buy them lunch or dinner.

Don’t get contractual

Even with paid contributors or speakers things can go wrong as misunderstandings happen, people get sick and volcanos disrupt airline schedules. If something goes wrong, threatening a damages suit against someone who has done you a favour is a bad look.

Expect to be stood up

While most professionals will honour their obligations, paid assignments have to take priority. As a freeloader, you have to accept your project will not have the same priority as those the contributor will get paid for.

Say thank you

After the event, show some appreciation. It’s good manners to at least send a card and maybe a small gift. For many professional writers and speakers a written testimonial or a LinkedIn recommendation is a nice way of saying thank you.

Should you be asking for a freebie?

There’s no shortage of third rate events, webinars and magazines on this Earth you have to ask if you can’t afford to pay for talent, then is your project really adding value? The fact that attendees or customers won’t pay could be an indicator that you aren’t adding value.

Similarly with the contributors, they may be free because they don’t add a great deal of value. You may want to consider a smaller project where you can pay your speakers, writers or other creatives for higher quality work.

 

There’s many good reasons for organisers to run free events or participants to donate their time, probably more than the excuses not to do so. Unfortunately in the Internet age, free is being abused and many creatives aren’t getting paid for their time and skills

For free to work, there has to be respect and some mutual obligation. Someone who does something for free to help your project deserves your respect and support.

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