Notice Technologies Blog

What Will Win in the 2nd Great Tech Boom

2011-12-23T09:03:00-06:00

I spent a lot of part I of my thoughts on 2011 & beyond in our industry focusing on what I don't think will work. This blog post will be markedly more positive, at least for those companies that I think are going to make it after all. Thinking about it, though, I think some commonalities are emerging.

But let's step back and review some concepts from Part I. I spent a lot of time on the concept of economic viability as judged by two simple concepts -- customer acquisition costs and lifetime value (LTV). Simply put, if your LTV after churn exceeds your fully loaded customer acquisition costs, you're a moneymaker. If not, you're a failure. There are lots of ways to analyze businesses, but if you comprehensively and accurately know marketing costs and LTV in what is of course an uncertain business environment, you're doing better than most. That's easier said than done.

Now hold that thought for a moment.

I would argue to you that there is overwhelming evidence that we're in a mini-bubble, a lower-rent, better justified version of the first one (1997-2000). There are a lot of sure signs -- new businesses getting huge valuations even in public markets, investors in those businesses trying to convince people that those valuations are indeed rational, the huddled masses listening in violent agreement (amazingly enough), venture capital raising huge new funds, and billions of dollars going into startups worldwide again.

And to repeat before I go too far, I don't think this is a terrible or irrational thing. Social media, location services, smartphones, tablets, local/SMB services, and other sectors are getting turned on their heads a bit -- and the uncertainty/disruption creates opportunity for investors. So please don't put words into my mouth that I'm opposed to what is happening or think it's insane, because I am decidedly *not* there. I'm discerning, and that's fair.

Anyway, as we are at least in a mini-bubble, a lot of businesses have been created in a short period of time. All have one thing in common: they are fighting like hell for market share. They're fighting for attention alongside others in the startup community. Enterprise startups need enterprise validation -- and fight for enterprises and/or agencies to adopt, promote, and pitch their products and services to decision makers.

And so what that creates is hypercompetitive frenzy, where there are probably at least 1-2 startups and often more for any opportunity you may perceive to exist in the world. Tech is one of the most competitive markets in the world because barriers to entry are relatively low (no PP&E in the era of Amazon Web Services) and you can win with your brains, a good idea, and great sales execution. Thus, the market is incredibly efficient at finding every glimmer of opportunity and taking advantage of it. So you get a ton of startups seeking attention.

These startups fall into three categories in my mind, and I'm sure there are more.

Destinations -- places that consumers and businesses are expected to visit repeatedly. Branding is critical, otherwise you're out of sight/out of mind. Think modernized traditional media (Mashable, ReadWriteWeb, Techcrunch, Huffington Post) but also the hundreds of thousands of applications on the iPhone and Android (Gowalla, 4sq), game publishers, daily deals providers (currently), apps like Pandora, etc. If you're a destination, you're only as good as your branding + your last trick. Don't rest, because you can't.
Service businesses -- organizations that provide human capital to solve specific problems for clients. What's critical in these is to not be a commodity. If you are providing a commodity service, you're racing to $0 margin. If you have some competency that makes you among the best in the world, you're probably OK.
Enablers -- groups that deliver a product, service, or data that fundamentally makes people more productive. This can be a tangible time savings benefit, a cost savings benefit, or ideally both. It can also be a "data benefit" -- removing barriers to data can be a huge enabler. Think of Amazon Web Services -- it's a genius bet on the need for developers to quickly conjure processing and storage cycles to develop, run, and scale applications. Same goes for the Apple App Store, Windows Azure, Facebook with social plug-ins that have now become ubiquitous and of course the Facebook APIs, LinkedIn for resumes and employment/employee data, arguably Twitter for media publishing and content discovery, local Austin startups Infochimps (data) and Famigo (publishing child-friendly content), and my favorite new startup, Twine. All of these companies, in their own way and perhaps by accident, enable people to conduct business and be more efficient.

Not that all the destination business examples I listed are fads, but a vast majority will be nothing more than that because they're currently capitalizing on something that is presently *hot*. Mashable is great and a must-read, but would it get 20m+ monthly unique visitors if tech was not hot? We just saw Gowalla deadpool because it took advantage of the hot LBS market, but could not expand beyond that. Arguably Groupon has cooled off because daily deals just stopped being compelling, and now as a result, they're dealing with the customer acquisition cost/LTV problem albeit as a public company. Ouch. Destination businesses have to grow rapidly and find ways to be essential and build brand, or they're ultimately dead. The ones that go the VC route therefore raise a ton of cash but they're a lot more uncertain than they appear and are under a ton of pressure.

I'll defer a broader discussion of service businesses to 1Q 2012 for now. My point today is more about disruptive technology providers anyhow.

Enablers, in my view, are where I'd focus dollars if I were an investor. First of all, they're differentiated by their ambitions. They are not trying to change the world, but rather to provide a useful service that other people can some way build upon -- be it technology, revenue, knowledge, data. Ergo, their bet is on the opportunities they see more broadly. They focus their efforts on the utility of and the benefits of the product/service they're offering *to other people*. Some of those will win, some will lose. But enough will win to make access and all the hard work that entails a worthwhile pursuit. There is less direct interaction with the end customers, but rather tons of interaction with modern-day "channel partners" who can offer products and services to hundreds, thousands, or more end customers. But the Enabler is not invested in any one per se -- it's a "portfolio theory" approach.

The one thing I think winners will ultimately have in common in the 2nd Great Tech Boom is precisely what winners of other eras have realized. Infrastructure stands a greater chance of winning than apps, destinations, and other properties that are by definition perhaps more "opportunity" plays than "sector" plays. It's not to say that all Destinations will fail and all Enablers will succeed. But I'd make a pretty big bet that we'll think of Destinations fondly as relics of a past gone by, and that Enablers will as a group have much more lasting power.

The Dot-com bubble, the 2nd Great Tech Boom & Economic Viability

2011-12-21T10:33:41-06:00

I suppose we are three years into the boom of this cycle in tech, and 2011 has finally given us a few IPOs -- Groupon, Zynga, Pandora, Angie's List, and LinkedIn. Others like Facebook, Twitter, and Yelp reportedly intend to go public in 2012. Investment continues to pour into startups, although there are signs that early stage investments are dropping slightly in favor of Series B and Series C investments into companies that are scaling to grow and eventually reach a liquidity event of their own. Some startups like Gowalla have hit the deadpool. Others like Hunch and ReadWriteWeb have modestly exited. And a wide array of others are fighting for their place in the world.

If you've read this blog for awhile or seen some of my posts on Mashable and other publications, you know that I've been critical of a vast majority of new products and services that have been invented in this cycle. But it isn't because I don't like the companies or their founders. Quite the contrary -- I've interacted with many and like just about all of them personally.

The problem is that they all face the same underlying economic problem -- for many, customer acquisition costs are significant but there is little/no lockin. At the end of the day, all of these businesses will have to face that core economic reality. If it looks like there is not a chance these business can overcome the customer acquisition problem and become economically viable, I get skeptical.

Interestingly, almost all the local/SMB plays have heinous customer acquisition metrics as reported by their S-1s and other financial statements. It's why Wall Street has not been kind to Groupon, Angie's List, et al.

As it happens in every boom cycle, a vast majority of us get intoxicated by the possibilities for both startups and newly-minted, publicly traded companies. But those very possibilities dominate our thinking -- and we underestimate the risks and/or the costs associated with building audiences of loyal customers who won't migrate. From a purely economic standpoint, the migration/churn problem is just as bad as the acquisition problem.

I had an exchange with Robert Scoble yesterday on Google+ where we briefly debated this very issue. Robert is one of the better pundits out there, but in my view he's a tad optimistic because he thinks of the possibilities far more than the risks, alternatives, and customer acquisition costs.

I am perhaps the opposite -- I think in economic terms and am influenced by the last tech bubble. People said the same thing about Priceline, vertical web sites like Pets.com and Living.com, Webvan, eBay, Amazon, etc. The economically viable ones survived. Those that were not died. Optimists and pessimists were both correct, as I'm sure they are now.

When projecting ahead and thinking of the survivors of this cycle, ask yourselves which properties are truly economically viable in the long-term. That's the only filter that matters.

It's why I continue to be bullish on Facebook -- they're mainstream and habitual. Can they screw up? Of course. But the collective community of friends on Facebook makes it a part of our lives that is more or less impossible for us to leave. Path can challenge Facebook as it is more about "close friends", but they still have an uphill battle to climb to gain mass mainstream adoption.

In the 2nd part of this blog post, which I'll release in a few days, I'll talk about other winners I foresee... and the thing that I think all will have in common when it's all over.

Polygraph Media - Adventures in Big Social Data

2011-11-14T11:28:42-06:00

Sorry we've been so quiet lately - have been hard at work taking a product to the marketplace. We are jumping into the big social data business feet first. You can sign up for our private beta at http://www.polygraphmedia.com.

In addition, Tommy Perkins (who traveled with me to Denver) made some great observations in his blog post yesterday. I encourage you to check it out.

All told, we are very excited about these new opportunities and we see a lot of potential in big social data.

Google+, the shiny new thing, and the perils of business process innovation

2011-07-19T22:55:44-05:00

We're all captivated by bright, shiny new things. In the tech business, we've had a lot of them in a short period of time. Some (like the iPod) shut off entrepreneurial activity and brought all the value of a number of industries (music/video marketplaces, DRM, MP3 players, etc.) more or less to a single company -- Apple. Others (like the iPhone and iPod) create a ton of economic value as companies look to engage with customers better. Consider also, the world of "self-publishing" has been unleashed with Twitter and YouTube. Social context has been unleashed with Facebook. Our resumes and business relationships have been captured by LinkedIn. And the potential of local business services has kinda been unlocked by Groupon, LivingSocial, and location-based services.

If it all ended tomorrow, we will have lived through one hell of a run over the last 7 years. We've come a long way in a short period of time. I don't think it's over by any means, but let's call it for what it is. It's great to be in tech right now.

Now there's another shiny thing, Google+, which from my vantage point appears to be a less functional version of Facebook with a good UI for putting people into Circles. It has attracted a large audience of people in the tech industry, but the masses can't help but ask the question:

"Why should I use both this and Facebook?"

Google+ solves a problem that power users of social networks have -- easy ways to differentiate friends and to put them into groups easily. The resulting data set that emerges from this would be rich. But, of course, it has to scale beyond people in the tech industry. And the everyday person has to see & understand the value in it to make someone migrate from Facebook primarily to Google+. I haven't even mentioned the challenge of moving your entire social graph as well. Social networks are a lot less interesting when your friends are not there. I already see this phenomenon on Google+ -- pretty much the most active people there are folks in my Twitter stream, not people in my Facebook News Feed.

It's ambitious of Google to go after this market. I think they originally wanted to unseat Facebook, but Google+ may end up being a bigger competitor for Twitter. The audiences right now are almost identical. The use cases are also -- I use both to listen, not so much to participate.

If Facebook truly feels a threat, I'm sure they'll introduce a slightly modified Circles equivalent and knock the legs out from under Google+. That's the trouble with business process innovations -- they're so easily copied. You have to have more than business process innovation to last. You need a technical edge and a visionary roadmap to compete today, in addition to a world-class user experience for whatever it is that you are selling.

The bigger question this begs for me right now is really why Twitter has not innovated much. And are they planning to do so anywhere other than ads? Heck, it may not even matter. As stale as Twitter may look these days, it's all over mass media and it remains the best way for average people to keep up with their favorite celebrities. Those are two huge advantages.

Square and Facebook... two no-brainer disruptors

2011-06-28T22:44:42-05:00

Sometimes, I do a better job making a point when (instead of sitting at my keyboard) I engage in a deep conversation with a colleague about things I see in the marketplace. The give and take of conversation can't be matched IMO -- and I'm a visual thinker/learner.

I had a conversation recently about the current social media phase we are in with startups. I sortof bucket companies in a few tiers:

no-brainers -- companies that will exit for a massive amount of money & will have staying power. The ones that totally redefine markets in/near them -- although their evolution could drastically change what/who they are.
tweeners -- those that may exit for a massive amount of money, but could very well go extinct because they either don't execute well or they don't ever achieve *real* traction outside of what is fed to you by the PR engine.
the DOA -- those that enjoy hype early but are doomed because market or economic forces will overtake them. These are also companies that are perhaps too visionary as they are skating to where the puck will likely be in the next cycle or beyond.

I think there are two no-brainers right now -- Facebook and Square. Facebook has been a no-brainer for a long time. I include Square here because they have nailed product simplicity/elegance and nobody right now really threatens their ability to sign up thousands of local businesses daily.

I'd include LinkedIn with the no-brainers, but 1) they've already exited and 2) I am concerned about their lack of product innovation over the years. They just don't have the best track record although LNKD could be significantly different as a publicly traded company. Then again, if there is a quarterly revenue target, you may see less innovation and more quarter to quarter revenue/profit focus.

Twitter may evolve into no-brainer status with their Apple integration -- that was certainly a great move for them. However, without that deal they were a classic "tweener" company by my definition. Twitter has not graduated to mainstream usage, although every major media outlet mentions Twitter in an attempt to relate to younger audiences. I also suppose you can get tweets from just about any celebrity today. But Twitter otherwise is not a no-brainer deal -- something that appeals to the mass market and is used regularly by the mass market. It's a high bar, I admit.

All of the location-based services are "tweeners" to me or worse, although I like recent moves made by the market leaders. None of them have proved repeated usage, but if they do, they're golden.

You'll have to talk to me privately about "DOA" companies -- I simply won't mention any here in the Notice Technologies blog. ;-)

How do you evaluate what is truly interesting and what is hype? For me, it's pretty easy at the moment.

Groupon, the S-1, and the state of the group purchasing market

2011-06-06T08:56:55-05:00

A few quick thoughts on group purchasing this morning. We have a pretty unique perspective on this business because our first launch was a local coupon platform. We considered adding group purchasing to our product, but we did not initially do so for a few reasons all related to the fact that we didn't think the business was sustainable. First, we thought the discounts were too high for most small businesses to bear long-term. Second, there was no apparent long-term competitive advantage as the technology and business process could be easily replicated. Ergo, millions of dollars would have to be spent on customer acquisition in a business where competition would drive down operating margins. i.e. bad and worsening economics = no thanks.

Several things happened throughout 2010. Millions of dollars were being earned by Groupon, LivingSocial, and the hundreds if not thousands of blatant knockoffs built by enterprising developers around the world. It wasn't easy answering questions about why we didn't take advantage of this opportunity, and we were starting to question ourselves in the process. Even our partners started to ask about group purchasing more and more as the "lore" of "millions" of "easy profits" became legendary. We reluctantly added group purchasing to the Lasso platform in early 2011, but not without the reservations that we always had about the economics of the business.

Around that time, we had also been brought in to talk about group purchasing with a few companies who were not making the money they expected to make with it. We pretty consistently heard problems related to the economics -- either customer acquisition was tougher than expected, the merchants were pushing back, or both things were happening. I remember saying sometime to someone (can't remember who) in the early spring that the worst job in the world was being an oppressed group purchasing salesperson.

Now after reading Groupon's S-1 in detail, I am a little stunned at just how bad the economics of group purchasing are playing out even for the "market leader". I thought second-tier competitors faced a much bleaker situation than the market leaders. But if Groupon is suffering, who isn't? Maybe the entire group purchasing industry is just a big money burning machine.

Folks in the local media business have taken a lot of criticism over the last decade for failing to modernize their businesses -- more or less for focusing on revenue and not on new business models. That criticism is pretty fair, but it is what it is. Local media companies have operated profitably for many years by doing the same things -- so why would they change significantly especially when executive management just has to keep chopping wood to sail into the sunset for a very comfortable retirement.

But here's what's a bit horrifying for technology folks -- critics at local media companies may just be correct to ignore group purchasing. Unless something changes pretty significantly, group purchasing is headed down a path of other overhyped "technologies" that just don't make economic sense. Group purchasing was considered to be a "no-brainer" just a year ago. Now after reading the S-1, do you still think it is a huge opportunity.

Consider a few numbers from the S-1:

Groupon lost $420m in 2010 and $117m in Q1 2011.
Groupon earned $713m in 2010 (far less than the $1-2 billion reported elsewhere), but did earn almost $700m in Q1 2011.
Marketing + SG&A was 178% of Gross Profit in 2010 and 143% in Q1 2011. Yowza.

So all the numbers say at present is that you can make billions of dollars in revenue if you spend billions and more. I can walk around my neighborhood and give away $1.25 for $1 all day long. :-)

But in all seriousness, the S-1 was really the first time the general public got a look under the kimono of the world's leading group purchasing provider. Here's what it told me:

Groupon can't continue as is forever. They'll have to get more efficient and/or eliminate some competition.
They'll have to become considerably more innovative. Groupon Now is one such innovation, but even that will take considerable marketing funds and great execution to work.
Being a group purchasing provider is a really terrible business at scale. I don't doubt that smaller companies can be profitable winning a niche, but local group purchasing done at scale all around the world is tough especially as competition intensifies.
Group purchasing, as it currently exists, cannot win the local advertising market. In a business where nobody involved in the transaction truly wins -- the provider or the local business -- interest will fade.
New media companies that thrive in the coming decades will effectively combine content, local advertising, and services for advertisers as an agency would. I particularly like the work that our partner, Culturemap, has done with their "hybrid" new media play.

Deal data has always been the name of the game -- and will define the future of this business. This is why I like aggregators who rise above the fray -- Yipit is one such company. It's also why I think Facebook has gone the aggregation route as well. More to come on this as it all plays out.

8 Observations from #mashcon (Mashable Connect)

2011-05-17T08:57:54-05:00

I was fortunate to attend Mashable Connect late last week -- a great conference down in Orlando. I don't have a ton of time to write right now, but I thought I'd jot down some observations. Here were my takeaways:

Surprisingly (to me at least), I didn't hear a lot of innovation from the speakers. The bigger companies innovating were really just showing off or describing their incremental advances on the iPad and in social. The agency folks didn't really share anything I hadn't heard before and the startups were "eh". No big deal but I didn't hear anything earthshattering and that shocked me a bit.
I though Michael Lazerow (@lazerow) from Buddy Media had an interesting vision. It was almost a mini-pivot in that Buddy is moving from customized Facebook apps (where FBML once provided a "moat" but with the iFrame no longer does) to Social ROI. Who knows how that will work.
I did talk with a lot of "social media cheerleaders', which is fine but to me indicative of both the fact that I was indeed at an industry event and that we're in a bubble. Bubbles occur in any industry where there is rampant optimism and where skeptics are unpopular and their opinions are almost shocking. An interesting data point for me was when @districtjoe (great guy) pointed out that I'm skeptical about everything and that he doesn't hear that often. It's called an echo chamber & most folks at the event were squarely in it.
I loved @steverubel's clarity -- overall his presentation was great. His explanation of the cloverleaf really made a lot of sense to me -- I had seen the illustration before but had not heard it described so well.
As is typically the case, there are a few brands who are silently & humbly kicking ass. You know who you are -- and you know far more about the business than many of the invited speakers.
@scrollmotion dragged me kicking and screaming into submission. The iPad (and the "tablet movement") is indeed real and here to stay. Really impressive stuff.
I heard a great argument for Twitter from @jkrohrs, a new friend I made from ExactTarget. I am not sure I totally agree with his points that Twitter is better for marketing than Facebook, but I understand the argument better just from spending a few minutes with him. Smart guy.
Finally, this one has been covered a bit but I'll say it again -- tech startups are starting to behave more like agencies and vice versa. Agencies control customer relationships and are finding small development projects that can be productized. Tech companies are realizing the limitations of a software business model & can be much more profitable if they include a services/consulting component. That's a dirty word for a lot of VC-funded tech startups, but it may make them financially viable and it can work out that way faster than the alternative.
(bonus) I really like Gowalla's clarity now. They seemed to get caught up in "check-in mania" last year & it confused their value proposition. Now they are enhancing experiences with location and vice versa. Much clearer. Much better. The messaging and the approach fits them. I hope they succeed.

Congrats to the Mashable team for a great event -- I really enjoyed it (maybe at times too much!!).

Status Updates, Social Data Mining, and Intelligence

2011-05-03T15:21:43-05:00

Techcrunch ran an article yesterday on the Twitterer who unwittingly, unknowingly live tweeted the raid on Osama bin Laden's compound. I thought it was a particularly interesting case that underscores a few things about social data mining -- an area where we've worked in earnest for about six months and where we are starting to make some real progress.

But first, a quick sidebar:

I've said numerous times that the "social" phenomenon of the present day is really a few things -- mapping of the social graph *and* the revolution in real-time/self-published data.

They are inherently different, although all the major social nets (Facebook, Twitter, LinkedIn, and YouTube) do both.

Twitter has mastered real-time data (for now). As long as they don't freeze developers out of using the data stream, they'll be OK. If they get too cute, they'll kill the golden goose and developers will innovate around Facebook's status updates and/or a Twitter competitor will emerge.

Facebook is the winner of the social graph (for now). Similarly, if they just execute their plan and not freeze developers out of the social graph, they'll too be OK.

So whether or not you like Facebook and Twitter, both are undeniably capturing a record of history like no other entity that ha scome before it. Historians will have a field day poring over records of Tweets and Facebook updates to recount history as told and experienced by normal people.

Speed and transparency to relevant information are being redefined. Tech-savvy observers of the bin Laden story knew that the best way to get the latest information was to run a search on http://search.twitter.com -- not to listen to the live broadcast of your favorite news outlet.

We discovered that 15 years ago at STRATFOR when we mined Lexis Nexis for relevant data and information as traditional news outlets relied upon tried & true methods of gathering news. Lexis Nexis was just a digitized collection of articles -- certainly higher quality than the public stream of consciousness but more or less conceptually the same.

And even 15 years later, mining the Internet and real-time data is still the name of the game. Facebook and Twitter users are people who (for their own reasons) talk about things they experience every day. They do so in the open yet in relative anonymity because of the volume of the stream. Decision makers who can pull out the intelligent nuggets from amidst the noise will beat other people who rely on others to tell them what is important, and there are implications in a variety of industries. Consider the following:

The aforementionied Twitter user who live tweeted the operation in Abottabad to find & kill Osama bin Laden -- that data was in the open hours before any news organization reported it. News organizations can integrate the wisdom of the crowd into the newsroom like never before.
Investors in a particular market or equity can find out about supply disruptions or can mine social networks for information on how employees of a company feel about business prospects. They similarly can use the global feed or parts of it to monitor sentiment
Companies in a competitive market can mine social networks for information on customers, leads, and people with purchase intent. They can identify specific targets and understand their likes/dislikes. They can also map influencers of that person, people that person influences, and more or less what makes them tick.

But despite all of the possibilities and all the advances in self-publishing and the Internet, collectively we have not gotten better at getting smarter, faster. The news organizations, investors, and leading companies of the next decade will be people who learn how to mine real-time data -- both what is being said, by whom, and by the additional context that qualifies just how important the information is.

Thoughts for Corporate Marketing Executives

2011-04-18T14:05:46-05:00

This post is a long time coming -- as our company has shifted focus a bit to brands, I have been thinking a lot lately about how bigger companies make decisions and draw conclusions about social media and where the will focus attention. For every person who says that they want to increase Facebook investments (a good idea considering the data), there is a person who says that they also need to increase investments in QR codes or Instagram (a bad idea considering the data). This coming from a set of customers that is supposedly concerned about Social ROI?

Pardon the generalization, but I've found that corporate middle-manager thinking about marketing is about as paradoxical as it gets. The world's best companies optimize their operations and their marketing campaigns on data. The top companies hire the best and brightest from the world's top business schools to analyze outcomes and redirect tactics. Yet when it comes to marketing and social media, I often hear the most optimistic and laughable things about social media from brand stewards and corporate marketers. Some of the biggest cheerleaders about social media come from the corporate world. Their observations are based on personal preferences and usage patterns, and are devoid of persuasive statistics as if numbers are unimportant. Very few (when pressed for specifics) can tell you that a meaningful business outcome improved dramatically because of using anything other than Facebook and maybe Twitter.

Why is this the case?

Individuals want a job in a hot startup & get attention by showing support.
Individuals want to stand out from their "moribund" corporate employer that "doesn't innovate".
Individuals are not held to a high standard about "data-driven" thinking.
The brand's need to "innovate" outweighs the need to develop Social ROI. Put differently, the brand needs to connect with younger demographics and is willing to accept some inefficient spend to experiment.
Agencies and experts dominate thought leadership, and the echo chamber is winning.

The first two make a lot of sense when you consider the divergent interests of individuals and the companies they work for. A middle manager may be making a great career move by encouraging new technologies -- it may land him/her in a job, an advisory role, a spot among experts in the social media community, VIP invites at events, etc. Individual branding trumps all in today's world, and that's just a reality of marketing in the present day.

#s 3 and 4 are more management issues -- which may or may not be an accident. Brands seeking to redefine themselves, especially those that are viewed as being "old fashioned", are desperate to do anything that appears to be innovative. A handful of experiments may just provide the serendipity needed to do something meaningful and important down the road. But I find all too often that the middle managers report to senior executives with very little understanding of social media platforms, much less how to use them for marketing purposes. Sorry, but if you don't use at least Facebook regularly, it's hard to coach middle managers on what success looks like. So often times, middle managers are really creating the agenda for "social marketing" whatever it means, and ROI is tough to get because 1) they may not be doing the right things, and 2) their managers may not know exactly how to improve the situation.

#5 is a misalignment of incentives. Over the last decade, agencies have done a particularly crafty job of getting between corporate marketing dollars and technology providers who make things simple. Agencies have sold social media marketing, management, monitoring, community management, and a wealth of supporting platforms as a cocktail of unnecessarily confusing, yet important set of tools that any "smart" business would utilize. Of course, managing it all is easier if you just hire the agency. ;-) A vast majority of thought leaders work for the very agencies that have gotten so adept at selling this complexity to the corporate world. Oddly enough, the skill sets required to conduct good social media marketing and community management are not terribly complicated. But because corporate marketing groups don't yet have the talent to develop an internal competency -- intern to executive -- they outsource this.

But to repeat -- the very people selling highly profitable agency retainers to your company are the ones setting the thought leadership agenda.

Now before anyone accuses me otherwise, I am a friend to agencies. There are a lot of great people in agencies and I have a lot of friends there. But if you're an exec managing a brand, you have to recognize this dynamic to do your job well.

I suspect that this tech boom cycle will end a lot like the last one. Companies that provide real value will survive. The vast majority that don't will not survive. Brands and bigger companies will gradually bring things in house as they get smarter. As new technologies mature and get "less cool", investments in them will wane. Investments in things that truly do move the marketing needle will increase and will disrupt the old way of doing things... much as you're starting to see investments increase in Facebook over existing web sites and e-mail.

But the way to get ahead of the curve today is to rein in middle managers and talk in terms of data -- measurable success. That is, if you really care.

Brands and the valid hype around Social Commerce

2011-03-29T13:20:16-05:00

A few weeks ago, I was honored to be asked to share my thoughts in The Future of Marketing's 2nd virtual conference. They interviewed 60 experts worldwide on where things in marketing are heading, specifically as it relates to personalization. The event took place today, so you can listen to the 60 minute event by visiting the link above.

Naturally, Facebook is leading the way in personalization because profile data is so rich and relatively accurate. Sure, some people lie in their profiles, but the vast majority of Facebook profile data is accurate and most Facebook users are real.

Targeting users based on personal data has been the golden goose of advertising for a long time. Magazines and other publications with highly concentrated audiences have always fetched a high CPM relative to publications targeting a broad audience. Facebook allows brands to tap into these demographics in ways that very few Internet properties have delivered.

As large enterprises and brands start to rationalize the expenses associated with maintaining and managing social assets, there will be increasing pressure to monetize them directly. Facebook is leading the charge as the platform of choice for social commerce. It has a massive lead in audience and targeting capability because profile data is the centerpiece of the technology.

More to come on this as certainly our business is focusing in coming months on social commerce for brands and large companies.