We’re just a few days from Y2K+10, ten years after the big scare of the whole world collapsing from a lapse in computer programming foresight.
I remember it closely, I spent a few hours in the later part of Dec 1999 backing up data at the small business my wife was working at. We were able to download nearly all of her company’s (a very small office) data onto just over a dozen zip drives, remember those? Funny that we could fit nearly all the digital files onto those drives –perhaps, if Y2K fears were to happen, it’s better than uploading to the cloud.
I also remember an army of Y2K consultants, and their concerns over liabilities, appear marketing how they’d offer CIOs Y2K enterprise proofing for companies that were concerned about losing all their data. I even had one slightly off-keel friend stay home on NYE 2000 eve with a gun in hand, military rations beside his bed. I wasn’t phased, I enjoyed reveling in downtown San Francisco with friends.
I want you to reminisce, do you remember what you did to protect your personal data, finances, work data, or what your company did in preparation for the Y2K apocalypse? Leave a comment, share with others, and take a look back 10 years ago. To trigger some memories, here’s a video to remind you of the fear, oh Leonard, really? Illogical.
A few months ago the Facebook and Twitter deal fell apart, and Facebook knows it must open its community to the open web –not just behind a login in order to benefit from generating revenues through advertising and search advertising.
This Friendfeed acquisition make sense as it’s primarily a buy of the talent and team –not so much the website itself. Why? This team of ex-googlers have roots in gmail and google maps, they know how to build scalable social apps, and are also located in Silicon Valley (I’ve visited them a handful of times).
Friendfeed.com doesn’t have a tremendous amount of visitors (monthly uniques are under 1mm says Compete, compared to Facebook’s 250mm registered users) so the acquisition is for the cherry features like Search, Best of Day, and elegant and rapid procuring of social content in real time.
Expect information in Facebook to continue to become more public, and this acquisition will help fuel this. Previously, Facebook allowed profiles to be made public, and spurred a landgrab from vanity URLs.
Although the teams haven’t made any indicators of their long-term plans, I’d expect the Friendfeed features and technologies to be folded into the larger Facebook. The terms of the deal must have been great for Friendfeeders, who have often indicated they wanted to go it alone.
Facebook’s acquisition is truly about getting a seasoned team on board that’s done it before.
Facebook was smart to purchase this young player who has yet to reach critical mass.
Expect Friendfeed features to be folded into Facebook.
Expect Facebook to continue to show more public content.
Update: It’s an interesting job to watch the rapidly evolving web industry, and during my many meetings with companies, I learn which companies are fearful of others, my most retweeted Tweet is the following:
“IBM is afraid of Microsoft who is afraid of Google who is afraid of Facebook who is afraid of Twitter who is afraid of whales.”
Cute, sure. But in all seriousness, this acquistion is a way for Facebook to circumvent and harnass Tweets, as Friendfeed aggregates tweets in real time.
Facebook is undergoing pubescenct changes in the next few years –from a private pre-teen to a public facing member of society –that’s what I told USA Today. Facebook initially made it’s promise to be a private community, but realizes it must now be more public to compete with the open web. Expect more awkwardness for the social network and it’s users’ over the coming years.
What are the indicators that Facebook wants to grow up and be public?
Facebook launched Beacon in late 2007 that was it’s first gangly moment that resulted in public backlash as customer data was shared without users’ consent.
Facebook already has thousands of sites with Facebook Connect, which allows users to login with their Facebook ID to a site (making registration pages less relevant), and exposing limited amounts of profile information –expect this to expand as it’s successful.
A few weeks ago, Facebook allowed a mad rush to create vanity URLs for profile names and fan pages. Yesterday, Facebook announced it’s going to turn on new features that allow many types of content to be public from individual posts, as well as a set of permissions by your different groups of contacts.
As Facebook crosses this chasm they are buffering with the right staff, and have hired lobbyist Chris Kelly, Facebook’s chief privacy officer, who not only deals with internal programs and policy, but also government groups.
Why Facebook’s Strategy Must be Public
Data that is public has more opportunity to be seen by the public, thereby increasing opportunities for advertising and marketing revenues.
Secondly, this is a trend of the open web as Twitter and other public social networks take hold.
Thirdly, take a look at Generation Y, my observation is that they appear more open about what they want to share, at least for now.
Lastly, Facebook’s play is to be an identiy hub, therefore its Facebook Connect features will let our Facebook logins spread the web, as a result, Facebook will aggregate the data back to it’s homepage, making it the centralized place we go to get information.
Expect More Social Awkwardness Over Next Few Years
As Facebook continues it’s global domination as the world’s largest non email social network (you do know that email is the largest social network, right?) expect to see more focus on privacy as they slowly change their value statement of being a private safe place with your real friends to be more of a public online discussion with the open web.
The key Facebook challenge is they have to convince, enable, and encourage its users to be public and open –they can’t turn on these features without breaking user trust.
Sometimes, in a recession, the best way to increase profitability is to fire your own customers.
I’ve been hearing from a few vendors and agencies, that they’re letting go of their least wanted clients. Why? During a recession, vendors are focused on being efficient with all resources, and in some cases, some clients are net negative in time, energy, resources, and morale.
Some clients are net negative
There’s a rule-of-thumb in the business realm that 20% of your customers will comprise of 80% of your total revenues. If that model is true, then likely the inverse holds truth: the bottom 20% of your clients account for 80% of all of your resource spend.
This is exactly what I heard from a recent agency I met with, they strategically decided to get rid of the bottom fifth of their client base. Why? The costs require to service some high touch clients that increase scope creep, are cheap in the invoice, shop around beyond reason, and even cause emotional abuse to account managers made it ‘net negative’. It makes sense, especially with the account manager abuse, right? What would you rather lose, a client or a dedicated employee, and risks of damage to morale?
So which clients are most likely to get canned by their vendors? Often times top name brands feel they can tout their reputation in hopes of getting business from vendors at the lowest cost –yet expecting the highest service. Having worked in the banking industry for a short time, I know that vendor management often has it’s own department that scours the market to ensure the company is getting the best deal.
Social media vendors at risk for unpaid education services
In the social media space, (which I cover) I’ve been hearing of some brands requiring extensive education from vendors. From full strategy days (non paid), non-stop Q&A in email and IM, and phone calls. While in such a nascent industry this is important, and key for a vendor to demonstrate ability, at some point, it crosses the ‘greasing the skids’ to being a complete ‘time sink’ –especially if the vendor isn’t charging for it’s hard earned knowledge in formal education offerings.
Vendors should analyze their customer base
Vendors, now more than ever, are starting to evaluate how to cut costs, and perhaps the first place to look is finding the resource sink that’s taking up the organizations time, resources –and willpower and focus on the higher value clients. A few considerations:
Evaluate the clients that you have that are net negative –is the long term gain worth it?
Could you better allocate your resources to increasing growth in premium value clients
How could your staff be better spending their time?
Often, companies purge their employee base to ensure quality talent, can you do the same for clients?
Buyers should partner with vendors
Brands, who don’t want to be stuck in the costly multi-month RFP, vendor evaluation, negotiation, and paperwork process should take in the following considerations:
Are you exceeding the scope of the original requirements of the agreement?
Is your team calling in special favors on a consistent basis?
Do you consider your vendor a long term partner and have made that clear?
Is your team getting proper education from folks who specialize on new topics? Or are you unrealistically expecting them to hand hold you beyond profitability?
Having an unhappy vendor will ultimately impact your quality of service –and folks in any industry talk amongst themselves.
Business relationships are two-way
In the end, we should all remember that these business transactions go both ways, and the relationships will sever when both sides aren’t met. In my predictions of the future of the social web, it’s possible that buyers (and vendors) could rate their relationships with brands –and even individual stakeholders, if that comes about, it could cause a shift in power from buyer to seller.
Would love to hear stories from you all about when vendors have fired their own clients, I ask however, please keep specific brands names out of the comments.
Left Image: I was stunned by the diversity and co-existence of thousands of species at this tropical reef exhibit
Change is coming, whether you like it or not. Jive software, a company I formerly cover slashed 1/3rd of it’s workforce (see update below), likely in response to it’s own VCs suggestion to slash costs to become cash flow positive in the now famous RIP Good Times preso. Cutting 33% closer to 20% of your body off to make sure you can still float in a few years is cutting very, very deep, no doubt customer service will be impacted, and a slow down in the product roadmap.
(Update: I spoke to Sam Lawrence of Jive’s marketing last night, and learned that the layoffs were actually closer to 20%, not the 33% that was reported, I’ve since updated the post)
Coincidently, I’m having a meeting with a VC over at Sequoia (have had this planned for a while) and believe me, the economy is one discussion we’ll be having and how it applies to the social media space. I’ll also discuss how this one is different from the dot com bust.
On Monday on my “day off” I went to the brand new California Academy of Sciences in SF, and was amazed and stunned by the phillipine tropical reef, one of the largest of that kind. There were thousands of species of fish within this exhibit, that many were co-dependent, co-operative, symbiotic and in some cases –parasitic.
I see the world through an ‘internet lens’ everything I see or do relates back to my passion, web strategy. I saw a quote that was gilded to the floor that completely resonated with me, and the changes in our reef.
[It is not the strongest of the species that survives, nor the most intelligent that survives. It is the one that is the most adaptable to change -Darwin]
Here’s a few opinions and news that I’m reading that discusses the impacts of an economic downturn and it’s impact on social media, and the web and general. Really take the time to read these.
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
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.
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.
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.
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.
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.
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.
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.
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.
I’m extremely busy these past few weeks, and you’ve noticed a slow down in my posting (have you met our other analysts?), so I’m going to do a series of short blog posts, unlike my longer meaty posts.
I met with Ali Partovi, CEO of iLike today, who told me about a recent trend of what I call “Transplant CEOs” that have addresses in Silicon Valley, are often here for meetings, but their company is located in other tech hubs like Seattle, Portland, Texas, Canada and beyond. Why this pseudo address? two reasons:
1) Running a company in silicon valley is expensive, talent tends to be flighty, and cost of living is high. In other cities, take Seattle for example there’s only a handful of web companies, keeping churn to a minimum.
2) Clients, investors, and prospects tend to want their leaders to be connected to silicon valley so having the CEO in the area makes sense, even if he or she just has a second house here.
I stumbled onto this large slide deck of global social media stats called the Universal Mccann International Social Media Research Wave 3. They break down usage of many different types of behaviors from creating to consuming blogs, rss, social networks, online videos, and uploading images. They provide a global viewpoint that you don’t see very often. While I don’t know their methodology to obtain these stats (they say they’ve a base of 17,000 panelists), it’s clear they are seeing growth in participation.
I found this link from future colleague Nate Elliott on his twitter stream, also read this blog. I noticed one small error in the 80+ deck slide, they spelled one blogger as “Michael Harrington” rather than “Arrington”