Compare and Contrast: Dot Com Bust and Web Two Point Doh

I’m spending my quiet time thinking about what lays in front of us, in fact, given the market data, there’s troubled times ahead not just for tech, but the US economy which of course impacts globally, as we’re major importers of goods from other nations.

I was part of the first web bust, at a high flying startup that had 5 splits then came crashing to Chapter 11 –twice. I tell my story about Exodus and remember it vividly, as without recalling history, we’re doomed to repeat it again.

In this post, I’ll compare and contrast how this was different from the last dot com bust in 2001, but I’ll do my best to provide an objective viewpoint –not one filled with panic.

Compare and Contrast: Dot Com Bust and Web Two Point Doh

VC funding
I don’t have access to a 10 year funding graph, but this article shows a rise in the number of silicon valley companies that were funded during the first web wave. While Techcrunch shows a noticable increase (a doubling from 05-08 in funding dollars from 2006-2008) in funding for the second wave, but shows VC confidence drastically lowering in 2008.

IPOs
In the first web wave, the exit strategy was IPO, where private equity was then made available to the free market, selling the ownership of the company to shareholders. In the second round, most companies exit strategy weren’t M&A but instead are acquisitions, or merger activity.

911 and Credit Crunch
This tragic day was the start of the collapse in the United States and other global partners. For the second wave, this was triggered by the credit crunch, perhaps very disastrous as well, and appeared to hit us out of nowhere.

Stock Drops
In the first dot come bust, many industries were reeling from the impacts of 911, (airlines come to mind) this set off a different kind of panic. We saw stock prices of dot coms bottoming out, then becoming penny stocks and resulting in a few companies collapsing. While some of the big players like Google have seen 60% devaluation of their share prices, most startups, being private, haven’t be hit in this way.

Market Performance
I’m not a financial analyst, so I can’t give much insight to this arena, but although the Dow Jones Industrial Average Index is currently at 9387 today, we forget that it was even lower at 7528 in October 2002, this Google Finance map (set to 10 years) shows.

Revenues
In the first web wave, while many were able to stand the test of time with actual revenues like Paypal, eBay, Yahoo, Weather, Google, Amazon, Linkedin, for many others it was about getting eyeballs, brand awareness, and pumping stock prices with announcements. Today, we don’t hear of many stories of companies who are now hand over first profitable, in fact, the largest players like Facebook, Twitter, and other social networks still struggle with defining clear revenue model.

Layoffs
The first web bust was known for the massive hacking of jobs, I remember many being layed off in silicon valley, and they fled to other tech centers like Seattle, Portland, Texas, and San Diego. I also recall that the number one migration of jobs in the valley was to become a realtor. I shifted to the banking industry (intranet) but would be somewhat hesitant today given all that’s gone on.

Innovation
The first web boom was funded by VC and private investors who had to put in a substantial amount of investments to get companies lifted off the ground, as a result, there were just a few players in each space. Today, development technology and open source have enabled companies to get launched from very little funding –sometimes none at all. Of course, this comes with a downside as you soon start to have too many players in one space, my list of community vendors caps out at 90 companies doing the same thing. Update: Jeroen de Miranda, points out in Twitter that today’s web delivery is more software as a service, not on premise software, making adoption faster, cheaper, in many cases.

Recruiting
Barbera Ling in the comments below nods to the point that recruiting will suffer now as it has suffered before. One contrast however is that now anyone can build an online reputation, and network with others with little technical skill using social media tools.

I’d love to hear your compare and contrast of the first web bust and what could happen in the next few years.

Layoffs in the Social Media Space

With the financial crises impacting not just US but global markets, as an industry analyst focused on social computing, I’m going to watch how this impacts layoffs in the tech and social media space.

While I take no joy in seeing jobs get cut, I do feature recent ‘on the moves’ and have links to many job sites related to social media. It’s only fair that I point out the new hires as well as the exits.

To be clear these layoffs aren’t just hitting the social media space, but will hit other industries. Most recent at the top, in some cases these are hard to confirm as sources from company feed rumor sites, so take them as you will.

Layoffs in the Social Media Space

Oct 14: Jive lays off around 20% of worforce

Oct 13: Redfin lays off 20% of workforce leaving 75 (link via TomCummings)

Oct 10: Fast Company, which has social network for website and popular videoblogger, lays off 20

Oct 10: Seesmic, a video conversation player lays off 7

Oct 6: eBay to lay off 10% of workforce to streamline after recession.

Oct 3: Gawker blog network lays off 19, and brags about it.

Leave a comment below with a submission, or watch these tweets with the tag #techlayoffs, there are three there now

Techcrunch has a layoff tracker, it’s like we’re seeing f-d company all over again.

Four Social Media Questions You Must Answer During an Economic Downturn

Most of my readers are interactive marketing professionals, they are experimenting, using, or living in the social media world –for some, it’s part of their very being and defines them professionally, and personally.

Social Media (which has gained popularity in the last few years) has never stared down an economic downturn, My CEO sees at least three to four quarters of reduced technology spending, and Chris Kenton sees even a more dire situation.

Four Social Media Questions You Must Answer During an Economic Downturn Whether you’re a CEO of a social media company, a professional blogger, or a community manager at a large corporation, you’d better be able to answer the following questions:

1) Is social media usage going to increase or decrease during a recession by consumers? In the last tech bust, I remember many tech professsionals going back to school, becoming real estate agents, or fleeing silicon valley, will migratory usage patterns evolve in social media? Yet even if usage of these tools increases, yet do these consumers have buying power?

2) Will brands and marketers increase spending on media that is generally unproven? Blog network Gawker recently laid off staff in anticipation of advertising dollars dried up, the key word here is anticipation, it hasn’t fully hit yet. Anecdotal case studies are available everywhere about social media, but hard ROI measures are hard to find –will marketers lean on the guaranteed 1-5% return on traditional advertising?

3) Will these be tools to improve communiation and collaboration within the enterprise? Time to think internally here, with travel prices going up, companies reduce travel plans, will these tools increase productivity, or will face to face meetings still prevail? Are these tools effective in communication beyond the ‘shiny’ factor?

4) Will the economic downturn force efficiencies to occur by shedding companies that lack innovation? The dot com bust was considered a market correction, is it now time to get rid of the new wave of dot coms that are missing vowels? or are the operating costs just too inexpensive that they will still thrive –and keeping markets crowded.

I’ve lightly weighed both sides above, I have my ideas, but would love to hear your thoughts below, I’ll state mine too.

Update: this post by James Duthie has thorough analysis, a must read.

The Problem With SaaS: Lack of Flexibility

I’m deep into the Wave research (read my latest status update) for nine community platforms (big list here), in fact, this week and next, I’m in 5 and a half to 6 hour meetings with vendors getting to know them very well. Of course, that’s just one side of the story, I’m interviewing up to 27 of their customers (brands) to get the ‘other’ side of the story. You’ll see me pop up online for “Twitter breaks” here and there, surfacing for air, then submerging back again.

I wasn’t surprised to hear from a few brands that not everyone is a fan of Software as a Service (Saas), in fact, for some, on-premise software makes a whole lot more sense. What exactly was the pain point with Saas?

Of course, the most obvious points continue to come to mind: conservative companies, or those with truly critical data wanted to have the data on site, or wanted to self-support their own architecture, or wanted to modify the software at their choosing, yet I learned about something that I hadn’t even considered:

Some brands felt that being tied to SaaS meant they were at the mercy of the vendor when it came to the software architecture. While this is certainly the case not just for SaaS but all non-opensource software, when a vendor would upgrade a version, some brands were forced to accept the changes. In some cases, some brands were not aware/prepared of some upcoming upgrades to the SaaS software and were blindsided to the changes.

Furthermore, these brands felt that the larger customers who wanted specific feature upgrades were able to influence the vendor through direct pressure or even fueling the R&D work through feature requests. What’s wrong with that? Alot, if the feature requests of the larger customer don’t reflect the needs of a smaller SMB customer. Since the software is delivered over the web, there was little recourse for the smaller brand to deny the changes, they pretty much had to suck it up.

Now you may ask, isn’t this a problem with all software, SaaS or on-premise? Yes but vendors are more likely to allow customers to use multiple versions of on-premise software, of course there’s a date when they will no longer support it. Yet vendors who provide SaaS are far more likely to provide only one version, forcing clients to swallow the changes on demand.

Have you had a bad experience with Software as a Service? Leave a comment, let’s explore this further.

Related reading: Community Platforms: Here comes the CIO.

Update: As usual, the conversation has also splintered into FriendFeed.

How to Overcome Social Media Scare Tactics

The rapture of social media paralyzes some brands
Recently, I’ve spoken to a few large brands that have been getting the sermon from a few social media consultants about damnation to hell if they don’t convert. These type of scare tactics include suggesting radical change need to occur for brands to join the conversation, as well as handing over all control to the marketplace, should everyone in marketing can pack up and go home early?

Most brands aren’t firing their marketing group
In reality, this is rarely the case, (well cept for Dell, and a few others who had trial by fire) most brands slowly adopt these tools and the communication changes that happens, and I’ve never seen a brand completely turn over messaging control to the marketplace completely, have you? While there certainly are changes afoot, as technology impacts progress, there are course corrections happening at many companies, but I’ve yet to meet one CMO who’s fired the MarCom and Communications team in lieu of a team of external bloggers.

For conservative brands, take a pragmatic approach
Instead, perhaps the best way for conservative brands to move forward is to focus on three things:

1) Understand if their marketplace is using these tools, and how. First see if your prospects, decision makers or influencers are using these tools, do a study first, take inventory.
2) Next, have a goal, or an objective, rather than jumping in rather than being pushed in because someone else lit you on fire. Don’t allow fear to be the sole driver of your decisions, instead, focus on what success will look like.
3) Experiment internally with these tools where it’s safer, where mistakes can happen without the ridicule of the public looking on.

Focus on clear business strategy rather than allowing someone to light you on fire
While there are certainly changes happening in communication and marketing, this doesn’t mean you throw out the playbook, and react. Instead, for conservative or risk averse cultures, focus on understanding the changes in your market build a plan and experiment where it’s safe. When you look at moments of great change, see how history remembers the difference between radicals sand revolutionaries.

Let’s be objective, there’s a lot of challenges (and opportunities) with the social media industry, I’m cataloging them and tagging them ‘challenges‘.

Why Brands Are Unsuccessful in Twitter

Rodney Rumford bluntly points out in this latest post about 33 Brands That Suck on Twitter (be sure to read the comments for more color). Most of them have been “Hijacked” (their corporate name scooped by an individual) and many remain dormant. Having a successful brand in Twitter is few and far in between, and here’s why.

Why Brands Are Unsuccessful in Twitter:

Brands are slow to the party
Who knew that Twitter would become a phenomenon –esp among the social media circles and media? Most brands are too late to come and squat on their names, some savvy individual had the foresight to get the name (either deviously, or out of brand passion) brands like @disney, @marlboro are already reserved by individuals.

Corporate domain: “out for lunch”
As Rodney points out, some of the brands have registered their domains, but choose not to participate, they’ve just quietly reserved it, unsure about how to wield this slippery conversational tool.

Not personal enough
If a brand is lucky enough to have parked their domain, they’re now ready for the next challenge: producing relevant content that resonates with the audience. What should they tweet about? Obviously there ‘s a business driver, so announcements, re-echoing blog posts, and responding to direct (but safe) questions make the best bet. In many cases, there is no individual tied to the account (listed or picture) and no one knows if they’re talking to an intern, or the CMO.

Too personal for you
Yet brands have another challenge? Do they get into the minutia of the daily life as many Twitter users do: “updating my brand guidelines to include twitter rules of engagement”, or “attending marcom meeting about next week’s big acquisition”? Brands are at risk to either alienating followers –or just looking well, fake.

Campy persona wears thin
Some brands may take their brand too far, acting out the brand persona with pro-brand content that after awhile sounds like a trite recording of “want to feel better @jowyang, buy our product for relief” -soap style messages.

Big brother is watching
Some brands have started to ‘follow’ other members, hopefully to increase the rate of them following back. While complete normal protocol in Twitterville, many users get ‘freaked out’ when a brand follows them.

Hybrid brands of personal and corporate won’t last
In the case of both Oracle and Dell (and others I’m sure) many of their employees straddle both their personal sharing, as well as representing their brand (rather well actually). They choose names like @OracleJulio or @RichardatDELL, and really add to the conversation, both being personal, and promoting the attributes of the company. Unfortuantly for @OracleJulio’s situation, he moved on to greener pastures, and had to somehow get a name change, he’s now @socialjulio.

ROI unclear
What’s the ROI from Twitter? A very difficult question to answer, yet you’ll find the solution if you can also measure: “Whats the ROI of a conversation in real life”. Since many brands have an objective (return profit to shareholders or owners) ensuring this is a high priority task will be difficult for many corporations. (read more on broadstuff)

No one gives a care
Some brands, regardless of how they use twitter, their profile pictures, or what they talk about, no one will care. Either their product isn’t known, or not releavnt, or the brand hasn’t done due diligence to first find out if their market is even in Twitter, as a result, tweets go unheard in the forest, yet no one minds. (Update: I’ve added this one a few hours later)

Despite these many challenges, there are a few brands that are doing it right, take a look at ComcastCares, one who’s received press attention for responding to angry twitter community members. Of course, the real challenge is if they can make real long term changes to company’s products –or are they just a mouthpiece to dampen the social media amplifiers.

Got other reasons why it’s a challenge? Or have solutions? Leave a comment…

The Long Term Impacts of Online Critics on Personal Brands

This post is not about Thomas vs Simon B, but instead about the long term online impacts to personal and corporate brands.

A focus on online reputation and brands
I’m hesitant to publish this post, not because I don’t think it’s important, but instead, I don’t want to be caught in the cross fire between Thomas Hawk and Simon B of the SF museum. My focus is on the online impacts, not the specific quarrel these two have around photographers rights, I wasn’t at the museum that day, so I really can’t comment on what happened.

First of all, please note that Thomas Hawk is a friend of mine for a few years now, he supported me at my first Lunch 2.0 at Hitachi, and a blogger dinner with the CEO of Hitachi Data Systems, and even took the picture I use everywhere (see right), I admire the man’s work, we will continue to be friends for many years.

A personal brand is damaged
Yesterday, he published a post outlining a conflict he had with a director at a SF museum regarding photographing in public. The post characterized Simon B (I’m not using his full name as I don’t want to make the situation worse) as an a-hole. Thomas’s blog is well read, his social media prowess strong among his community and in true social media fashion, it spread to Flickr, Zoomr (where Thomas is the CEO), Friendfeed, Twitter and perhaps the biggest driver –it was seen by millions on Digg (including a portrait of Simon).

Today’s resume is your Google search results
Today, if you do a search result and examine the first search engine results page (SERP) you’ll notice that as of today 9/10 results are tied to Simon being an “a-hole”. Perhaps most importantly the first two results are of Thomas (we know most clicks start there), the only one that’s not is Simon B’s Facebook profile, which has very little info.

Simon had very little online footprint to start with, and now it will be dominated online by all of these social media elements. Even if Thomas chose to change the title of his blog and flickr, the Twitter, tailrank, and many other online echos will forever be archived –Simon’s online reputation is forever linked to this incident.

Essentially, Simon B’s online reputation has been burnt.

The Long Term Impacts of Online Criticisms on Personal Brands
For Simon, these online results are a big impact, we know that many recruiters use the web to find candidates, and seeing several results like this could result in a recruiter passing up a candidate. If a recruiter doesn’t care, or doesn’t see this, hiring managers are likely to do Google searches on the individual finding this. Of course, this could swing towards Simon’s advantage, some museums or businesses may seem him as serving as a defender of the property, if he positions himself correctly. Perhaps the biggest damage is to Simon’s personal and family relationships, who will see this incident online for years to come.

Key takeaways:

For those that don’t already participate online, and have a small digital footprint, they don’t have a strong platform to stand from.

Anyone is susceptible to brand damage, even if you’re not in this space (Simon is not in a web professional)

Bloggers with large social media platforms are incredibly powerful, and must recognize the long term impacts of their actions.

Businesses should assume every customer (and employee) is capable of impacting an individual or company’s online reputation

Companies should already have a crises plan ready to deal with online criticisms, read this article from CBS on outsourcing brand damage experts

Simon B may have to buy search ads to get his printed resume or story correctly positioned

Customers and Corporations should first consider the Company Customer Pact

Update: To be fair, if Simon or the museum come forward with a statement, I’ll update this post and link to it.

Thomas Hawk has left a thoughtful comment below, see comment #28

A similar blog post (and discussion on Friendfeed) has started to take place.

A post reviewing Thomas’s change and update to the post (it now reads “jerk”)– since the community reaction has been so fiery

August 13: The Museum has made an official statement, suggesting we move on –I agree.

Dec 3, 2008: It’s a few months later and Thomas Hawk’s blog still shows first for searches on Simon’s name in my SERP, of course, your results could vary.

The Many Challenges of the Social Media Industry

Like every industry, the social media industry is plagued with problems that for now, are slowly being solved. It’s important to note the challenges in our industry in order to first identify them and eventually overcome them. There is no indicator from our data that Social Media will go away, in fact the adoption rates of Generation Y, indicate this is a trend, but with that said, let’s first examine the issues in the industry:

The Many Challenges of the Social Media Industry

A current lack of profits
The social media space, a movement where anyone can participate has resulted in low or no revenues for most participants. For example, there are millions of bloggers, and only a few of them can claim serious revenues, and even a smaller subset have built media empires. Aside from the users themselves, many businesses focus on generating hits, visits, or registered users and will figure out how to monetize. Take a look at social networks, some valued at billions, yet we’ve yet to hear success stories of hand over fist revenues. Like the universe, stars and revenues are far and few in between, a majority of creators will not generate revenues.

Some innovation spurred by funding –not revenues
Both a problem and an opportunity, investors (VCs) continue to inject money into this space –often funding unproven business models or one-off technology. In more mature industries, it’s unlikely we’d see such an influx of spending, but often because innovation was spurred off the success of actual revenues. With so many companies being funded without actual revenue, the market is exposed to a several variants of the same feature.

Low barriers to entry make competition cut throat
Commodity software is always a concern, and when this occurs, there are so many entrants the market is confused –unable to determine who to purchase from, and competiors may eat into each others margins. Take for example the crowded community platform space (aka white label social networking) industry that has over 100 vendors –all offering very similar software.

Excessive noise drowns out signal
With everyone able to create content and share the details of their personal lives in detailed minutia, the problem of excessive content becomes an issue. Every 60 seconds, 13 hours of content are uploaded to YouTube (says YouTube employee), and millions of tweets are generated every day. With so much content being created, how will one filter out what’s important?

Amateurism threatens professionalism
Nodding to Andrew Keen’s criticism of the dangers of amateurs creating less-than-professional (and sometimes incorrect) content then spreading it prolifically this has caused some concern for those who consume this content. The problem of course, isn’t really the quality of content, but the ability to quickly decipher what’s important –and what’s not.

Marketers move in without community consideration
Wherever people move, marketers follow, while some do it smart and savvy, many will approach it from a different style. For example, the concept of pay for post, social media optimization, bacn, spam-like content on blogs and social networks, and other marketing noise is and will continue to be a challenge whenever communities congregate. (updated per Jennifer’s suggestion)

Corporate and personal brandjacking
Becoming more and more common, brands –and individuals– can easily be brandjacked as others take their user name, domains, and assert themselves as someone else. Given there are hundreds if not thousands of websites to monitor one’s brand, squatting these names will increasingly become difficult over time.

Lack of standards causes disparate experiences
Although better than many industries, the open web still slowly moves towards common standards of logins, social graphs, and content types. Even protocols like Google’s OpenSocial were designed to unite activities and applications across any social network, each container (social network) requires tweaking to customize to each platform, while some –like Facebook– don’t participate at all.

Cultural changes cause resistance
Without a doubt, this movement of self-publishing and connecting is a disruption to the marketplace, media, the buying cycle, and the marketing funnel. Generation old barriers are crumbling from a command and control viewpoint to an open and collaborative style of business and personal communications. With these radical changes comes resistance from those who were previously in power (media, management, marketers, governments) who are slow to adopt –and thus resist.

Identifying true expertise challenging
In experienced industries, track records are defined by years and sometimes decades, in this burgeoning new industry, it’s often difficult to decipher who is a true expert –and those that have actually performed a social media change to make a difference. Mostly, track records only go back a few years, and few can demonstrate a return on investment.

Difficulty measuring ROI
Despite many attempts to measure “engagement” or “ROI” there still is no industry standard to measure the efforts of social media at the personal –and corporate level. While many have developed their own ability to measure on a one-off way, there’s no industry way to quickly –and easily agree pan-industry.

Conversational Marketing may not scale
Peter Kim points out that social media marketing may not scale. Primarily due to the 1:1 relationships that are needed to engage in conversations, it’s difficult for one person (despite how large their platform is) to cover all the conversations in a given market. Be sure to read the thoughtful comments. (added August 23)

Rumors can impact stock prices
This example of a rumor spreading mis-truths about Steve Jobs health actually cost a dip in Apple stocks. With rumors flying around more easily than the time it write an email, the internet often doesn’t have time to self-correct before bloggers hungry for link bait jump on, adding to the flames. We often see this pile on behavior during blog fights too.

Hyperconnected can’t scale
For some hyperconnected folks on blogs, twitter, friendfeed and facebook, they don’t scale as everyone reaches out to them, as a result, they miss deadlines, opportunities during this long battle to stay up to speed. Technology has created this problem when the world flattens out and there are no more gate keepers, I thought it would be fun to be like this, but in reality, it’s a curse too.

I realize this post could infuriate some social media purists, but I wanted to provide an objective view of what I’m seeing in order to map out danger spots on the map, so we can collectively overcome them. I hope you read my other posts where I list out challenges of social networks, widgets, blogging and others, if you plan to run in this space, first know the hurdles.

If you can think of other challenges in our industry –feel free to leave a comment, I’m curious to hear your reactions. (Update: On a related note, Jeremy Pepper is holding the experts to task)

This post has now been translated to Italian, thanks Marco

Why Some Don’t Need to Join the Conversation

I find the colloquialism “You must join the conversation” a tired phrase legacy of 2006. It’s overused, oversold, thrown around and just not accurate.

Many of the blogging authors are my friends, or I even work with them, so before I offend anyone, let me first preface with some context. When I think of online conversations, I think of real world ones, where people are engaging in dialog to and fro. For example: Typing conversations in messages forums, on twitter, on plurk, writing a blog post, leaving comments on blogs, or even friendfeed.

Before we get too wrapped up in “joining the conversation” it’s important to first note that not everyone is creating content and leaving comments. In fact, we’ve published public data to prove this. See this profile tool, select a demographic and pay attention to the conversational behaviors we identify as creators (creating blogs, upload video or images), and critics. (rate and rank content or leave comments). Learn more about the different behaviors by reading this 8 slide presentation.

To prove my point, let’s start with data: In most markets, (even youth) there are no bars that span 100% for creators. In fact, 18-24 year olds in United States only are creators 39% of the time. 45-54 year olds in UK only create online content a paltry 6%, although they are critics 11% of the time.

So what does this tell us? Not everyone is part of the online dialog exchange. Not everyone will ever be part of the online conversation.

On the flip side, I can influence my marketplace by not being part of the conversation. How? I can vote for content on Digg, tag content on Delicious, share feeds from Google reader, all of which flows into my Friendfeed where there are almost 2000 influencers reading. For my marketplace of web strategists and interactive marketers, that wouldn’t be the best use of my time, I can get more mileage by being a creator. The point is, I’ve the luxury of making that decision based upon my understanding of my community.

Now this is not a suggestion that brands shouldn’t do anything, but in fact, they should first look at the social behaviors of their marketplace, and then choose the right activities to engage in. It’s important to note that “Joining the conversation” is but one way to engage.

Therefore, we should first take into account that people use the web in many different ways (some are non-conversational) and before we anoint our entire communication strategy to be purely conversational, let’s first do some self –and community — analysis. As sometimes, the greatest behavior in a community isn’t conversations, it’s ratings, rankings, gestures, link sharing, profile creation, connecting, or just reading.