Chaotic Flow

Streamlined angles on turbulent technologies

Why is Google so successful? Most people reply to this question by saying that it is the company’s superior search technology. This is why Google is so popular, but this is not why Google is such a successful company. Google is successful for one simple reason: it made advertising invisible, thus creating huge value for users and web publishers simultaneously. I believe this is the fundamental business challenge for platform makers of social media (social networks, blogs, rating systems, media sharing, etc.) and syndication (rss, widgets, toolbars, personal home pages, etc.), i.e.,. simultaneously delivering high value for web publishers and their communities without being intrusive.

Social media and syndication sit to the right and left of search. Search is great for catching people when they are already looking for something, i.e., in the middle of a purchase process. It is less effective in creating awareness, facilitating a decision and building brand loyalty. These are the strengths of social media and syndication, because these technologies leverage the organic, local connections of the Internet (as opposed to search which adds them up and presents the aggregate results). As such, they have the ability to reach out and engage the single individual, allowing him or her to discover your content surreptitiously, spread it virally and subscribe to it permanently.

This is enough to make businesses based on these technologies immensely popular. It is not sufficient to make them successful. Becoming an integral, useful and most importantly invisible part of the users purchase process will.

More than once I’ve pointed out that marketers of B2B SaaS applications should look to the consumer side for inspiration to lower costs of sales by automating the sales and marketing process and integrating it thoroughly into the product itself.

However, after sitting on a panel on social media platforms at Digital Hollywood last week, I realized that there is considerable wisdom that can be transferred in the other direction. I’ve often maintained that B2B marketing is actually harder, or should I say more like pulling teeth, than B2C marketing. The reason for this is that B2B marketers have always had the luxury (or burden) of having deep access to the customer’s decision making process. B2B marketers have been engaged in the development of demos, white papers, reference accounts, referral programs, user groups and conferences, influencer marketing in the form of analyst relations, press relations, evangelist/advocate programs, and lead customer pilots, etc. etc. for decades (if not centuries!).

Whereas consumer marketers have been largely restricted to the two A’s of the well known AIDA model, i.e., generating awareness at the beginning of the buying cycle and providing promotional offers toward the end to motivate purchase—until the advent of social media. Unfortunately, the advertising practices and institutions for plugging into the two A’s are so well established that they are still being applied by rote to the ID stages, e.g., Facebook’s now infamous experience with beacon. Advertising practices in B2C have focused on doing things TO consumers in order to “drive awareness and purchase” whereas B2B marketing has been focused on solution selling practices that do things FOR their customers by focusing the customer’s need/pain/ROI and facilitating the purchase process to ensure that it proceeds as smoothly as possible.

IMHO, the changes we are seeing in marketing practices brought on by social media, syndication, and the Internet in general are completely analogous to the changes we’ve been watching inside the enterprise over the last 20 years and they require a similar reengineering mindset to master them (to resurrect a passé catchphrase from the 90’s). The emotional and rationale behaviors that people go through as they make a purchase and develop a relationship with your brand have not changed; however, the new technology allows significantly greater access to and opportunity for automation of these processes. For example, rating systems not only allow consumers to record their recommendations, they accelerate and broaden the reach of a natural, human buying behavior through automation. Both B2B and B2C marketers can learn a lot by reexamining what B2B marketers have been doing manually in the ID stages of the AIDA model with the intent of finding opportunities to reengineer and automate these using social media technologies.

If there are two areas of cross-disciplinary study I would recommend for every Web PR and Marketing professional it would be linguistics and postmodernism.   The reason is that Internet marketing (and branding/marketing in general) is driven by forces described by these disciplines…and the ideas have been around for 50 years, so there is no need to reinvent the wheel by figuring it out for yourself.  I’ve seen a number of blog posts triumphantly delcaring that The Medium is the Message, and while true, I personally didn’t learn much from them that I didn’t already know from postmodern theory.

I’d like to try and clarify an idea that I think is creating great turmoil for most PR firms and media outlets in general, from blogs to wikipedia to cnet.  The difference in Web 2.0 is not that the medium has suddenly become the message, the medium and the message have and always will be fundamentally inseparable, the difference now is that a) anybody can create a message and b) anybody can modify the media.  This change is blurring the lines between PR and marketing, and IMHO to be successful in PR 2.0 and Marketing 2.0 you have to get these two fundamental shifts.

Old school PR adhered to a certain set of ethical rules designed around a certain media structure.  News was FILTERED by experts in the form of reporters and editors who controlled access to FIXED media channels, e.g., a magazine, a newspaper, a TV show, etc.  This was the world of broadcast media.  The ethical PR person followed this model by making sure the message being offered was newsworthy and by pitching this newsworthy story to these ordained few.  While this paradigm still exists, it is being rapidly eroded by user generated content and the Web’s inherent fugibility.   Now there is a spectrum of credibility caused by variable filtering that extends from MySpace to Wikipedia to the New York Times.  And, the medium itself changes every nanosecond with each new link that is created.

Depending on your product or service, your news credibility requirements take on different flavors.  For B2C, sufficient credibility may simply be what everyone else is doing…a trend.  For B2B, it is more likely to come from the more traditional experts or perhaps some of the newer ones like popular blogs.  The pressure on PR firms and marketers alike to adapt and take advantage of this new paradigm is strong.  Many will not survive the transition.  The two most important ideas that must be relearned are that a) your communication channels are radically expanded by social media and user generated content…you must have a solid understanding of your potential online media outlets and the right message for each and b) it no longer stops there, you must learn to modify the medium to your advantage.  More concretely, don’t just go to the NY Times and pitch your case study, consider what your presence should be on social networks, blogs, etc that are relevant to your customers…ask yourself:  Where do my prospects congregate on line?  Can I create my own community around my brand?  Then, create your own content and adapt the message to both the audience and the medium: don’t just make a viral video, because they are hot…you might be as well served simply by posting insightful comments to the right blogs.  And finally, focus on the medium itself to accelerate distribution and build a trail that leads back to your own website.  Link, link, link. Syndicate, syndicate, syndicate. Everywhere, all the time.  A news story in the print version of the NY Times lasts a day and then goes into library archives.  A blog post or a gadget can be redistributed across the Web, and a link from your story back to your website on a page rank 9 site has a much longer lifetime in cyberspace than the print equivalent in physical space.

The Internet sector is rife with companies that seem to have great product ideas, but can’t seem to monetize their offering. Strategically, this is almost embarrassing. I honestly can’t think of another industry that has this issue (feel free to clue me in if you know of one). While most small businesses and startups fail to ultimately turn a profit, Internet startups seem to stand alone in not having a clue as to what they intend to sell in the first place. It seems the only exit strategy for these startups is to be bought by a larger, cash rich company that offers something others are actually willing to pay for, like Microsoft, Google or Amazon, where they become a permanently free service or are absorbed into some larger tech stack as simply another feature. At any rate, because this blog is about strategy, many of the posts can be very critical. So, in the interest of balancing things out with a little optimism, I’ve decided to start a series called “Joel’s Picks” The companies I plan to highlight in this series are those that IMHO have real substance (read not hype) to their business model and exemplify sound business strategy and execution (and only time will tell if my judgment is sound).

LinkedIn recently announced it’s first baby step into the open social network platform game, and received no end of criticismin and around the social network futurist blogosphere. So, I’d like to go on the record as saying that while this criticism may be accurate from a technology evolution viewpoint, it is absolutely wrong from a business strategy point of view. LinkedIn is right to move slowly, because, a) their target audience is not using it for entertainment and doesn’t need all the newest gadgets now, b) isn’t on the bleeding edge of Web tech sophistication, and c) will not be as forgiving as Facebook’s if they screw up (and they could still screw up…social networking trust and privacy are risky business.)

So, why LinkedIn? Find me another social network that has a real chance right now of becoming huge based on subscription revenue alone. When I think of the recent trials and tribulations of Facebook, my first reaction is that “you get what you pay for.” While I know that most users do not pay the subscription fee on LinkedIn, this does not damper my optimism. The fact that some do exemplifies the value of the service. I can remember when Salesforce.com was free for licenses of 5 users or less; it isn’t anymore, in fact the license price is higher across the board. Too many social networks are going after target markets that simply don’t pay. Or at least they think they won’t. Haven’t these guys ever heard of market segmentation??!! I am talking to you Facebook.. My main point here is that it is strategically important to put a pricing structure in place that maintains a very low barrier to adoption, but does not preclude future revenue, i.e., users expect that once Facebook is free, it should always be free.

Rather than go on and on…here is a list of some of the things I really like about LinkedIn.

• A HUGE target market that truly leverages the inherent global reach of SaaS.
• A segmented, balanced revenue portfolio based on recruiter posting, limited advertising, and user subscriptions.
• Solves a problem for users, and it not simply entertainment that is used to capture users to solve the problems of marketers (like me).
• 2 and 3 imply that LinkedIn has all of its stakeholders coming and going and they LIKE it.
• Balanced revenue, plus a professional target audience encourages a proactive approach to privacy and trust, limited risk and liability.
• Social relationships/processes mirror their real-world counterparts, i.e., recruiting, networking, getting and giving advice, etc. These processes are enabled, not distorted by the technology or the business model.
• SIMPLICITY in design ala Google

So, please LinkedIn, don’t prove me wrong.

As the classic R&B song by the Persuaders goes, “It’s a thin line between love and hate.” The Annie Lennox remake of this is one of my favorites from her album Medusa. But, this post is not about my musical tastes. It is about the thin line that major brands are walking as they seek to deepen their interaction with consumers through social computing and other highly interactive Web 2.0 technologies. As anyone familiar with the song can tell you: the thin line is quite simply TRUST. Trust is created through personal investment, interaction and disclosure, the very things that these technologies enable. When trust is violated in a relationship, the deeper the relationship, the deeper the anger. So, the lesson of Facebook’s Beacon stumble is one that every Web 2.0 company should pay close attention to—the trust ante has been raised. Just as Web 1.0 privacy and trust issues sprung from Web 1.0 technologies, such as cookies and tracking a user’s Web surfing behavior, Web 2.0 issues will center on the much more delicate and private matters of personal profile information, social relationships and heretofore private interactions among friends, colleagues, acquaintances, customers and strangers. In Web 1.0, the solution was to never track a specific user’s identity for marketing purposes and to implement permission based marketing schemes. Mark Zuckerburg’s recent apology for making Beacon opt out by default, highlights the fact that in the frenzy of Web 2.0 even the basic Web 1.0 lessons have been forgotten. When in reality, we need stronger rules of the game to safeguard identity at the network and associated behavioral level.

Most of the excitement around Web 2.0 and social networking to date has centered on the unbelievable advertising opportunities it will create by directly leveraging word-of-mouth and micro-targeting. In recent posts, I’ve argued that this is fundamentally bartering a consumer’s privacy (because the service itself is free). I’d like to propose here that there is a better way. The safest and most effective way for a company to leverage Web 2.0 and social computing is by applying their inherent strengths of interactivity and personalization to establish trusted relationships with new customers and strengthen relationships with current ones—not manipulate them and weaken trust in their brands. For example, real-world word of mouth is driven by referrals. Online social networks can easily facilitate this process without disclosing identity or altering it in a fashion that is unnatural to consumers. Let’s take a look at Facebook’s Beacon in this regard. Below is the text from the Facebook site describing the benefits and details of Beacon for businesses using Facebook (clearly the pre-apology policy…but it is still up in this form as of today…need to get those departments in sync Facebook!):

“Simply determine which user actions you would like publish to Facebook and add a few lines of code to your web page. Facebook Beacon actions include purchasing a product, signing up for a service, adding an item to a wish list, and more. When a user performs the action, they will be alerted that your website is sending a story to their profile and have a chance to opt out. No additional user action is needed for the story to be published on Facebook, and users remain in control of their information.”

While Facebook has fixed the “opt out” problem (what were they thinking??!!), my personal feeling is that the service is still not a natural process for consumers in that you usually decide to recommend a service or product after you have tried it, not when you buy it. A much more natural process, would be to ask the user if he or she minds if the business checks in with them in a few days to see what they think. Maybe let them rate the product, and if the rating is good, ask them if they would like to recommend it to their friends. For another angle, compare Facebook Beacon to Amazon’s reviews. Amazon has it right, because it is helping consumers and publishers in their common interests, not one at the expense of the other.

In my last post, I argued that while Web 2.0 technologies offer great promise for more interactive and personalized marketing, they also entail commensurate ability to offend the consumer with SPAM, and therefore require greater vigilance to protect the trusted relationship between a brand and its customers , i.e., the more personal and interactive the communication, the greater the offense when trust is violated. But, I believe this is only half of the Web 2.0 privacy and trust dilemma.

At some point, we must stop and ask ourselves why so many of these great companies, that offer so much value by making the Web more personal, social and interactive are pursuing advertising-based business models where real revenue can only be achieved by asking consumers to barter their privacy in exchange for services. While it may not be much, most of us pay for mobile voice, text and wireless services, cable TV, books on Amazon, movie and game rentals, toys for the kids, and believe it or not, a premium profile on LinkedIn. The best advertising-based businesses, such as cable TV, Google or the Wall Street Journal are completely non-intrusive and often offer enough value to supplement this revenue with direct subscriptions. Are we really supposed to believe that a company like Facebook, with a multi-billion dollar valuation can’t charge for its services?
User adoption often becomes such a religion for Internet startups that it isn’t always obvious when, who or how to start charging for services. In this regard, I think that B2C companies can learn something quite valuable from the experiences in B2B software and SaaS: the cost of time and effort it takes to adopt a new application usually outweighs the price you ultimately would pay for it by at least a factor of 10X. The result is that you just can’t even give away bad software. If you are building a company that is purportedly delivering a service of such great value, but can’t conceive of a business model where some segment of business customers or consumers at some level of adoption will pay for it without bartering consumer privacy, you really should question the inherent value of your offering. Otherwise, you will most certainly end up on the same garbage heap of all the Web 1.0 companies that chose to venture down this same treacherous path.

I find it truly frustrating to watch Web companies continue to make the same mistakes regarding consumer privacy and trust, such as the recent Facebook fiasco. Are all these new wunderkind CEO’s who supposedly grew up on the Internet and therefore really “get it” just too young to remember the privacy and trust related stumbles of the Web 1.0 boom? Or, is this industry just so dynamic and chaotic that it erodes long term memory for those of us who did live through it? (I may have this problem myself, but I don’t believe it is Web-related) If there is one long standing marketing maxim that should be ingrained upon the memory of every Internet executive it is this: NEVER VIOLATE THE TRUST A CONSUMER HAS IN YOUR BRAND. For all the dinosaur bashing that offline marketing has had to suffer over the last 10 years, I will say this much in its defense: a consumer always has the option to turn off the TV, change the radio station or throw away a piece of junk mail with minimal effort or affront. One of the inherent advantages of passive, mass media is that you can always opt-out by tuning out at the very last minute without it becoming all that intrusive. This is not the case with interactive, personalized media (think telephones and telemarketers), because the offensiveness of SPAM grows in proportion to the level of engagement. Despite all the hoopla about micro-targeting that social media and other Web 2.0 technologies will ultimately enable, they will never provide the same level of protection to privacy and trust as the good old fashioned act of consistently asking for permission and enabling the consumer to control the experience.