Decoding the new economy

Is Groupon the small business saviour?

Does the deal of the day change the way we do business?

Since Google’s rejected offer of $6 billion dollars to buy deal of the day website Groupon, there’s been a lot of discussion of just what Groupon and the hundreds of similar services mean to online commerce and small business.

Groupon’s CEO, Andrew Mason, even went as far as to declare his organisation the “saviour of small business” on the Charlie Rose show.

John Battelle, founder of The Industry Standard and co-founding editor of Wired, examines Groupon’s business model on his Searchblog and concludes it will be the small business platform for the mobile Internet just as Google are to the web and Yellow Pages were to the telephone.

The problem with these ideas is scale. If every small business had the capacity and wanted to be on Groupon, the service simply couldn’t cope and the model breaks down.

In my area there are, according to the Yellow Pages, 115 hairdressers in my district. Even if Groupon were able to geographically target me to my neighbourhood, they’d need a third of the year just to cover hair stylists which is tough luck for the lawn mowing services, plumbers, patisseries and other small businesses that may also want to advertise on Groupon.

Which takes us to customer motivation, when I’m looking for a haircut, hedge clipping, cleared drain or chocolate gateaux I’m not particular driven by finding a bargain – if I do that’s great – but it’s not my motivation to buy.

Groupon, and the other deal of the day sites, are driven by customers looking for discounts, and the key to business survival – particularly in retail – is not to depend on discounts to drive your business. So business models that rely on discount hungry customers, or cashflow desperate merchants, are always going to be limited.

Groupon is a great business and it may well turn out to be worth $6 billion or even $36 billion. The barriers to entry are not so low as anyone who thinks executing an idea like this is “easy” doesn’t understand the work involved in building a local sales team like those of Groupon or Yellow Pages.

It could well be that Google wanted to buy Groupon simply for that sales team. The failure of Google to properly execute on their terrific local search product has baffled me for some time and the only explanation I can put down to it is what Silicon Alley Insider’s Ron Burk attributes to Cash Cow Disease, where companies like Google and Microsoft find themselves paralysed by the rivers of cash flowing into their businesses.

Deal of the day sites have an important role to play for businesses looking at demand management or clearing inventory and Groupon is a good business just like Clipper Magazine or Shop-A-Dockets, but to claim they are going to be the next great revolution for small business is giving too much importance to these channels.

There’s no doubt though that small businesses will be the big winner when we get local search on the web right. When we get it right we’ll probably see the hyperlocalisation model for the media start to take off as well. So it could save two industries.

Groupon though is not the small business messiah we’re looking for.

Other peoples’ platforms

The risks in the privately owned web range from obscure terms of service to arbitrary payment problems. This is why you need to control as much of your business’ online presence as possible.

“We have successfully established an online business, but we have run into problems with Ebay (indefinite suspension – unfairly I might add)” wrote Ralph*, an old client.

“We are pretty desperate, as this is now our sole business and we are now without an income.”

The Privately Owned Web

Ralph’s problem is typical of thousands of businesses that rely on one Internet service. Some months back we looked at “Nipplegate”, the story of a Sydney jeweller who had her Facebook page closed down because of her anatomically correct dolls.

All of these services are privately owned with their own terms and conditions along with their own corporate objectives. If you choose to use their product, you have to follow their rules – just like a shopping mall management can order you off their premises because they don’t like the colour of your socks.

The most glaring example of this is Wikileaks where Amazon, Paypal, Mastercard and Visa all threw the whistleblower site off their services for allegedly breaching their terms of services in various obscure ways.

The Terms of Service Trap

A business’ Terms of Service usually feature clauses wide enough to catch even the most honest and diligent business, this is by design as it gives management the excuse to throw anyone who makes their lives difficult, which is exactly what has happened with Wikileaks.

While Ralph’s problem is nothing like the scale of Julian Assange’s, all of these stories illustrate the dangers of relying on one service for your livelihood. Should that service change the way it operates, then any business that relies on that could be broke in hours, as many businesses that rely on Google search results have found.

Most of the Internet is not a public space, almost all of it is privately run along similar lines to that shopping mall or a walled estate.

Ralph and Julian Assange have shown us the limitations and risks of the privately operated web. As citizens and business owners we have to understand these corporations’ objectives are not always the same as ours and make judgements on how we live with the risk of finding ourselves in breach of a Term of Service in our business or personal lives.

We’re still in relatively early days of the net and all of us are still learning. One lesson is clear though, we can’t allow our livelihoods to be held hostage by a small number of big technology companies. Make sure you have alternatives to your online channels.

*Ralph is not his real name

Online ethics

how should we conduct ourselves online?

We have an established set of ethical rules for our professional and business conduct, but how applicable are these guidelines in the online world?

Thinking online communications aren’t serious, unlike what we say in written correspondence or at meetings, is a common fallacy. While it’s true most online chatter is often more informal and relaxed, we are still being held to professional standards whichever forum we use.

Many people treat what they put online as something similar to what you’d say over a coffee or after work drink, the problem is that most of what you do online can be endlessly copied and forwarded to others, as we see in the Wikileaks controversy. This makes it a very different medium to the spoken, informal social networks we have outside of the Internet.

We should also remember this isn’t just about social media tools like LinkedIn, Twitter or Facebook; it’s about any communication you carry out online such as using email, Internet chat, making comments on blogs or posting on public and private web forums.

In many ways the online rules are similar to the standards we expect in the offline business world, but because of the nature of the web, the emphasis is often different.

Private stays private
A private conversation has to stay private. What someone says to you in a private message or posts to a private forum – such as a locked Facebook page, an email or a direct massage – should never be repeated on the public Internet without the express permission of the person who sent it and those it was addressed to.

Don’t misquote
The remarkable thing about the Internet is how many people misquote others despite the fact most of what happens on the Internet is a written, or recorded, medium. If you’re going to quote someone, make sure you’re accurate.

Never plagiarise
Equally, you shouldn’t be too accurate. If you are going to extensively quote someone else, either link to their website or get permission to use their work. As the Cook’s Source scandal showed, we cannot assume that just because something is on the net we can just copy it.

Give credit where possible
Be generous in crediting other people for their work – linking to other people’s websites is not just a courtesy, it helps the web work better and adds value for all of us. It also improves your credibility.

Be open about affliations
Should you be commenting on issues you have a professional or financial interest in them then disclose them. On the web, people tend to be suspicious of those who may have vested interests so being open will enhance credibility.

Resist anonymity
There are good reasons to post anonymously however you should only do that when it’s necessary. Being open about who you are improves your reputation and credibility. We’ve looked at the risks and benefits of online anonymity previously

Be polite
There is a school of thought that claims manners aren’t necessary online. This isn’t true. You will quickly shred your credibility by being aggressive, attacking people and using foul language.

Don’t go overboard
If you get angry, take a deep breath and relax. Think about what you’re saying and if you have to post something angry, do it the following day when you’ve had time to think about it.

The idea that the online world is somehow separated from the rest of our lives is false. How we behave online has real consequences in the physical world as we can ruin our careers, be sued or even go to jail for things we say online.

Our online ethical behaviour should follow that of the physical world. If we wouldn’t do it on the street, in our meeting rooms or in front of our mothers then we shouldn’t do it online.

the price on our heads

Are we selling our privacy too cheaply?

Over 500 million people have signed up on Facebook, trading their privacy for the ability to connect with friends and online communities. In turn, Facebook has built that massive group of people into an asset worth an estimated $41 billion dollars. But does it rely on us selling our privacy too cheaply?

A common factor in many of our communication channels in the last fifty years has been how we, as a group, have been prepared to trade something personal in return for a cheap service.

Broadcast media’s model offers us free or – in the case of newspapers, magazines and Pay TV – subsidised news, sport and entertainment in return for shrill or intrusive commercials that usually wastes our time.

Similarly with social media tools, in return for a free and easy way to find friends and relatives, we trade our privacy for targeted online advertising which can be so precise a commercial can be designed just for one individual.

The social media advertising model is on many levels a great idea, it cuts out irrelevant messages to the consumer and for the advertiser it’s more effective than the “throw it against the wall and see what sticks” methods of the broadcast advertising world.

A weakness in social media advertising in that it relies on users being prepared to trade away their privacy. Until now, all of us have been fairly relaxed about this despite the evidence mounting that giving away all our privacy and access to our networks often has costs to our reputations and friendships.

That cost can be great, with the worst case seeing people lose jobs, friendships or even their liberty for something that they, or one of their friends, thought was quite innocent.

Under the old trade off, we could turn off the TV or not buy a magazine if we found the advertising too distracting or offensive. With new media we can’t recover our privacy once it’s been given away.

As we begin to understand the nature of our connected society and the values of our online reputations, we’ll expect a better price for our privacy. The challenge for platforms like Facebook and other social media tools over the next few years will be to convince us that these trade offs and potential risks are worthwhile for the benefits they offer.

The listening game

Our customers are talking about us, we need to listen

Last week’s Qantas A380 problem illustrates the power the Internet has and how businesses can’t ignore what’s being said on the various online channels.

Thankfully most of us will never have a morning where the world is told we have lost over four hundred of our staff and customers in a fiery accident as Qantas did last week.

While not a Qantas customer, I had a lot of sympathy and respect for their management and staff who had to deal with conflicting accounts while balancing their obligations to regulators, shareholders and, most importantly, the loved ones of those aboard QF32.

The initial story that went out on the media was a Reuters’ report that a Qantas A380 had crashed on taking off from Singapore. While Qantas were able to quickly deny that, they found their other assurances that no debris had fallen from the plane were quickly contradicted by online photos of the pieces in a nearby Indonesian town.

Luckily, Qantas’ communications teams appeared to be listening to these comments so were quickly able to verify their accuracy and amend the company’s position before they were embarrassed.

Today’s connected consumers armed with camera equipped, Internet enabled smart phones and can post images contradicting or confirming your message or understanding of the situation quickly. Which is exactly what happened in this instance with passengers and witnesses quickly uploading their views of the incident.

In one respect this is a threat to traditional management where controlling the message is everything, to the modern manager this is a fantastic opportunity to react quickly and positively to changing situations.

One of my favourite stories comes from the Virgin Blue checking problems in late September where staff, alerted by complaints on Twitter, were able to get water bottles out to thirsty passengers stuck in queues. It didn’t rescue Virgin from the PR battering they took, but it helped a few of their customers and just maybe won a few of them back.

This isn’t to say the Internet is infallible, far from it — the Internet is mankind’s gift to the ill informed ratbag and the mischevious troll — what you read on Twitter and Facebook needs to be treated with the same suspicion as what you see on Reuters and CNN.

Even when the information is downright wrong, you at least have an early warning there’s a perception problem in the community which you can quickly work upon. The key is to evaluate and recognise the credible from the silly and then be able to act on the credible while countering the silly stuff.

One big lesson from both Qantas’ problems last week and Virgin’s in September is how important it is to point all of your communications channels, including call centres to the organisation’s web site where up to date, verified information is available for the public, staff and customers.

While the net represents great challenges to business owners and managers of all organisations, it’s also a fantastic resource for getting your facts right and reacting to fast moving changes. Make sure you have the tools and the team to deal with the opportunities and threats our connected economy will throw at us.

Managing connected workers workshop

How do managers deal with twittering staff and employees on facebook?

Today’s staff consider the Internet to be a basic right and expect to use social media tools like Facebook and Twitter while they work.

Managing Connected Workers examines the motives for these workers and shows how managers and business owners can harness the power of these workers’ networks while minimizing risks to the organisation.

This workshop is designed for all managers concerned about staff use of social media tools inside and outside the workplace.

During the workshop participants will gain an understanding of why employees are using social media, ways of controlling it in the workplace as well as the risks and opportunities the Internet presents to the modern workplace.

Participants cover;

•   Why your staff are online
•    What is social media
•   The risks to a business
•   How a business can harness social networks
•   Your staff as your brand
•   Social media as a recruitment tool
•   Engaging with online stakeholders
•   Blocking technologies
•   Monitoring strategies
•   Developing a social media policy
•    Communicating with staff
•   HR and legal issues

Who should attend?
Managing Connected Workers is designed for managers and business owners concerned about the business effects of their staff’s Internet usage.

Workshop duration
We recommend this workshop be held as a four hour program at a minimum. The length can be up to two full days. We can tailor the workshop to your organisation’s needs and budget.

More details

Contact us for more details on this workshop and how we can help your business, organisation or community group identify and deal with challenges of our exciting era.

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