Social Media’s Value Problem

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In this AdAge article, Coca-Cola’s CMO, Marcos de Quinto, was quoted saying “Social media is the strategy for those who don’t have a true digital strategy.” This is in the context that Coca-Cola has seen their TV investment returning $2.13 for every dollar spent on TV, while their digital investment is only returning $1.26 for every dollar spent. As such, Coke recently brought on a new Chief Digital Marketing Officer from Bank of America, whose focus will be “the digital transformation of global marketing and align our system around a single digital marketing agenda.”

de Quinto’s statement about social media resonated with me. I entered marketing through social media, working across General Motors brands (Chevy, Cadillac, Buick and GMC). In those early days before Facebook and Twitter went public and social media was still an earned media channel, I really believed that social media could help brands create stronger relationships with audiences that ultimately led to more commerce for brands. This was coming off of at least a decade of digital marketing where display ads lacked creativity and storytelling and were becoming increasingly disruptive. Social media forced brands to become storytellers again – to create great content that audiences love and engage with.

But, as I took on more roles across marketing, I too began to see what de Quinto is seeing: TV still drives high ROI for brands that can afford to spend there. Social media has become purely a paid media play, and the ROI on different channels is very different. For example, targeting on Facebook is pretty remarkable. And, despite recent struggles with their analytics, I’ve still been seeing high quality traffic compared to other social and digital advertising channels. Twitter on the other hand is purely an impressions play. You might get tons of impressions and even video views, but those do not convert at any meaningful rate to website traffic where you can continue to develop a relationship with your customer.

And, this is the rub with social. Whereas, social media used to be the place for brands to create fresh, memorable experiences for audiences, it’s become a place of fleeting moments and a lead generation tool to drive audiences to a different experience: a website, an app, a webinar, etc. To drive audiences to an experience that brands can own and use to develop a richer relationship with their audience. As marketers continue to face increasing pressure on the ROI they deliver across their activities, social will face more scrutiny. And, marketers will need to be more purposeful about their digital marketing efforts – selecting tools and channels that support the specific marketing problems they’re trying to solve.

CMO Mondays: Snapchat files for IPO

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Last week, Snapchat’s parent company, Snap Inc., filed paperwork for an IPO, with an expected valuation of $25 billion or more. In 2014, Snapchat introduced advertising into the platform. In 2015, it generated $60 million in revenue from that advertising, and, in 2016, it expects to exceed its target of $350 million in revenue. Snapchat is targeting $1 billion in revenue in 2017.

Snapchat reports 150 million users daily and 235 million users monthly, including 41% of 18- to 34-year-olds in the U.S., according to Nielsen. Snapchat shows strong signs of being a healthy business. With continued user and revenue growth, Snapchat will be a hot company for several years to come – even with the new scrutiny of the public markets.

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But, long-term, Snapchat could face a similar issue as Twitter: being a company that offers only a niche audience advertisers. Unlike Google and Facebook that offer a large and broad range of audiences to advertisers, Snapchat caters mainly to younger Millennials and Generation Z audiences. Facebook touts ~1.71 billion monthly users – approximately 25% of the world’s population. By comparison, Twitter has ~313 million monthly users. Twitter has struggled in recent years to win over investors – primarily because it is compared to Facebook. Twitter has only ~18% of the monthly users that Facebook has. And, Twitter has been criticized for its slowing user and revenue growth while being unprofitable. Twitter’s stock price has dropped from $69 per share at its peak in January 2014 to $18.79 today.

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While we can expect that Snapchat will continue to grow its user base at a nice rate for the foreseeable future, as it captures more of share the 34-year-old and under audience, the real test will come when Snapchat can no longer rely on that audience for user growth. It will need to stay relevant to the new young audiences entering their teens and twenties, while expanding its relevancy to older audiences. And, it will need to do this while achieving profitability. Otherwise, in a few years, we could be seeing Snapchat face similar issues that Twitter has faced in recent years.

Welcome to the Post-Capitalist Society

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“In 2000, President Bill Clinton said in his last State of the Union address: ‘America will lead the world toward shared peace and prosperity and the far frontiers of science and technology.’ His economic team trumpeted ‘the ferment of rapid technological change‘ as one of the U.S. economy’s ‘principal engines’ of growth.”

I read an article in the Wall Street Journal entitled “The Great Unraveling | America’s Dazzling Tech Boom Has a Downside: Not Enough Jobs” by Jon Hilsenrath and Bob Davis. The premise is that the technology industry has not lived up to its promise of job creation – particularly since the year 2000. And, that this disappointment has led to political outsiders like Donald Trump and Bernie Sanders gaining momentum in this presidential race.

The article goes on to list some interesting facts and statistics:

“Google’s Alphabet Inc. and Facebook Inc. had at the end of last year a total of 74,505 employees, about one-third fewer than Microsoft Corp. even though their combined stock-market value is twice as big. Photo-sharing service Instagram had 13 employees when it was acquired for $1 billion by Facebook in 2012…

…The five largest U.S.-based technology companies by stock-market value—Apple, Alphabet, Microsoft, Facebook and Oracle Corp. —are worth a combined $1.8 trillion today. That is 80% more than the five largest tech companies in 2000.

Today’s five giants have 22% fewer workers than their predecessors, or a total of 434,505 as of last year, compared with 556,523 at Cisco Systems Inc., Intel, IBM, Oracle and Microsoft in 2000.”

On the surface, yes, it looks like the technology industry has failed to meet its promise. The younger technology companies founded after the year 2000 are employing less and less people. The jobs of the Industrial Revolution are being replaced by robots and software, and this will only accelerate with the long awaited maturation of artificial intelligence / machine learning. Every business today is (or should be) a technology business in some capacity to take advantage of the operational efficiencies (i.e. cost savings) that technology can provide.

But, a closer look shows that it’s not the technology industry that failed us. It’s our rhetoric and education that failed us. We read the tea leaves wrong about the transformation that technology would bring because we looked at the past to predict the future.

The First Four Revolutions
As I’ve written about before, economist Carlota Perez taught us that every half century, society has a “big bang moment” – a technological breakthrough – that ushers in a new technological revolution.

5 Successive Technological Revolutions of the Last 250 Years

If you consider the five successive technological revolutions we’ve had, starting with the Industrial Revolution in 1771, each created more jobs than the previous. And, this would make sense. With each revolution, we built more and bigger things, and we did it by hand. Physical labor was the currency of capitalism.

6th Technological Revolution Around the Corner

Why the Fifth Revolution Is Different
But, three things changed all that in our current revolution: the Age of Information and Telecommunications, which saw its big bang moment in 1971 with the Intel microprocessor, and which is at its tale end.

  1. Moore’s Law: An observation in 1965 by Intel’s co-founder, Gordon Moore, states that the number of transistors per square inch on integrated circuits had doubled every year since their invention and would continue to for the foreseeable future. This has decreased the size of our computing devices while simultaneously increasing their processing power exponentially for fifty years. And, it is only now beginning to slow.
  2. The Internet: Have you heard of this thing? It’s pretty amazing. Throughout history, innovation has been driven primarily through physical locations. “Hot spots”, as they’re referred to in network science, were typically found where there was a concentration of people and ideas colliding. These hot spots have popped up throughout history from the coffee houses in the Age of Enlightenment to the Parisian salons of Modernism. Some of these hot spots have also been industry specific like Silicon Valley for tech, Los Angeles for film and TV, and New York for finance. The Internet (and the World Wide Web) distributed the hot spot, so that its not restricted to a centralized location. The hot spot became decentralized, and has led to innovations like Safecast, which I mentioned in yesterday’s blog post.
  3. Cloud Computing: Then, cloud computing came in and decentralized computing infrastructure. Suddenly, you didn’t need to buy or lease expensive on-premise servers to build software. You simply rent what you need – and only what you need – when you need it. The price of software development dropped exponentially. Not only do you save on hardware (server) costs, but you save by not needing expensive people that know how to service the hardware.

So, what does this all sum up to? Since the rise of capitalism and throughout the first four technological revolutions, capitalism created more jobs because the primary economic resources were physical assets: gold, land, ships, railroads, skyscrapers, cars, etc. and the labor that was needed to build and manage them. But, while the fifth revolution started this way, it is ending by headed in the opposite direction. The economic force of capitalism, combined with Moore’s Law, the Internet and cloud computing, is driving a reduced need for employees. Today, one can build a highly valuable business with exponentially lower (near $0) infrastructure, supply chain and employee costs. Every non-critical resource simply becomes dead weight.

Capitalism Has Hit Its Tipping Point.
Consider this observation that Tom Goodwin shared in a 2015 TechCrunch article entitled “The Battle for the Customer Interface”:

“Uber, the world’s largest taxi company, owns no vehicles. Facebook, the world’s most popular media owner, creates no content. Alibaba, the most valuable retailer, has no inventory. And Airbnb, the world’s largest accommodation provider, owns no real estate. Something interesting is happening.”

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The Wall Street Journal article mentioned above highlights that Instagram had only 13 employees when it was acquired by Facebook for $1 billion in 2012, and WhatsApp had only 55 employees when it was acquired by Facebook for $19 billion in 2014.

The winners in the new capitalism are those that can create value with the least resources – including employees.

Why Our Rhetoric and Education Is Wrong
For longer than I can remember, political rhetoric around economic growth has been about job creation and good education to fill those jobs. This made sense given our history. But, what you see today is a frustration that those jobs aren’t being created – at least not in the technology industry. If anything tech is displacing those jobs.

In our new economy, employment looks more like a shorter long tail. As Chris Anderson, author of The Long Tail describes…

“The theory of the Long Tail is that our culture and economy is increasingly shifting away from a focus on a relatively small number of “hits” (mainstream products and markets) at the head of the demand curve and toward a huge number of niches in the tail. As the costs of production and distribution fall, especially online, there is now less need to lump products and consumers into one-size-fits-all containers. In an era without the constraints of physical shelf space and other bottlenecks of distribution, narrowly-targeted goods and services can be as economically attractive as mainstream fare.”

longtail

Anderson wrote his original article about the long tail in 2004, describing the effects of the Internet on commerce. iTunes and Amazon are prime examples in the music and CPG categories respectively. But, twelve years after the original article, we can now see that the same effects are happening to employment.  At the head of the tail are the largest employers – slow, lumbering legacy companies with immense overhead. Further down the head are the new class of technology companies – except that they are employing less people than their predecessors. They look more like a small, passionate and nimble tribe – with a minimal number of full-time employees supplemented by an army of flexible, contract workers (to whom you don’t have to provide expensive benefits). Consider companies like Uber, Lyft, Instacart, Luxe and Favor. Then, you get into the long tail. And, these are less so companies; more so, individuals that have learned to make a living through the digital economy. They’re building mobile apps for iOS and Android, creating subscription e-commerce businesses through Cratejoy, or selling craft goods on Etsy. They may even be content creators on YouTube, Instagram or podcasting. Indeed, the Wall Street Journal article highlights that “An Apple spokeswoman says it is ‘creating jobs in new industries like the App Economy.'”

Peter Drucker predicted such a change. In his book “Landmarks of Tomorrow”, he talked about the shift to the “post-capitalist society” where knowledge would become the primary economic resource over land, labor and financial assets. This gave rise to the concept of “knowledge workers” that is so common in management and consulting today. 

Where We Go from Here

“Give a man a fish and you feed him for a day; teach a man to fish and you feed him for a lifetime.”

So, our rhetoric needs to shift away from “get an expensive education, so you can get a good job and have a nice, long career” to “learn to learn, so that you can create your own income and be self sufficient.” The United States was built on entrepreneurship – on life, liberty and the pursuit of happiness. If we want to prepare our people for the pursuit, don’t give them a skill and hand them a job; teach them the game of business and let them play.

Marketing Mondays: Instagram Stories

On August 2nd, Instagram introduced its new Instagram Stories feature. For brands that have been using SnapChat Stories, this product is almost a carbon copy with some differentiators. For those that have not yet explored SnapChat, I’ll explain a bit of the context behind both of these products.

Instagram Stories is a new feature in which users can share multiple photos and videos in a slideshow format (your “story”) without having to worry about over posting. Each story disappears after 24 hours and is not posted to your Instagram feed or profile grid. For Millennials and, even more so, for Gen Z, this feature provides the ephemeral nature of sharing that drew these younger audiences away from Facebook and toward SnapChat. And, for Instagram (and Facebook), this provides a feature that can (potentially) lock in its own users, preventing them from testing and moving over to SnapChat.

Why did Instagram copy SnapChat?
There are a limited, albeit large, number of potential users available in the world. The world’s population is ~7.4 billion people. China is the largest market with ~1.4 billion people, followed by India at ~1.3 billion people and then the U.S. with a mere ~324 million people. Meanwhile, there are ~3.6 billion internet users today, globally. Every social network, chat app and content publisher is vying for those users’ eyeballs and time, so they can sell ads to brands. The larger companies, such as Google and Facebook are investing heavily in bringing internet to the other ~4 billion people that don’t yet have access to the internet, so they can grow their reach and ability to sell ads.

As seen in the chart below, Facebook alone dominates in the number of users that it has captured with ~1.6 billion users globally, as of April 2016. But, when you add in its other properties – WhatsApp at 1 billion users, Facebook Messenger at 900 million users and Instagram at 400 million users – Facebook’s reach becomes even more astounding.

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So, with this much reach, why would Facebook/Instagram copy the Stories feature from Snapchat? Because each platform captures a different audience segment. And, Facebook knows it needs to both guard its existing audience, and capture the next generation of young audiences that brands so aggressively covet. In fact, that’s why Facebook acquired Instagram for $1 billion in 2012 – to reach younger audiences. While Facebook started in 2004 as a closed network for college students to connect with “friends”, it quickly expanded as a platform for anyone to connect with close friends and family. Today, it is a catch all network to connect with anyone that you’ve ever met.

Younger audiences that recognized this trend, and wanted to capture and share their lives on a platform where their parents weren’t watching their every move, jumped over to Instagram. Instagram offered a simple, visual platform to publish selfies and other photos with beautiful filters, presenting an ideal – or even aspirational – image of users’ lives. And, the user’s profile settings could easily be set to private, so that only people whom the user accepts can follow the user and see her photos.

Facebook saw their young user base making this jump to Instagram, so they bought the platform – for a sum that only four years ago was considered mind-boggling, but, today, is considered a steal. As Ben Thompson writes in his post, The Audacity of Copying Well, Facebook and Instagram offer complementary use cases. Thus, instead of simply absorbing Instagram and its features into Facebook, Facebook had the foresight to understand that the best thing it could do with Instagram was let it live on as its own entity so not to alienate Instagram users, while integrating Facebook’s ad technology into the Instagram platform, offering brands the ability to target Instagram’s younger audiences.

The Snapchat generation (Gen Z), which came after the Millennials that grew up with Facebook, Twitter and Instagram, grew up with warnings from parents and broader society to be careful about what they post online. Photos, videos and statements can live on forever on these open platforms and be discovered with a simple Google or Facebook search. Enter Snapchat.

Founded in 2011, Snapchat offered an alternative to social networks as well as mobile text messaging, both of which kids’ parents had access to. Snapchat, after all, is a photo messaging app first and a social network second. Snapchat offered a private place in which to share photos that would disappear within 24 hours. The very nature of the platform, the value proposition, was to be ephemeral – to provide a refuge where young audiences could be their youthful selves without fearing future repercussions for actions and statements made today. Like Instagram before it, Snapchat saw droves of young users adopting the platform. And, in 2013, Facebook offered Snapchat $3 billion in cash to acquire the platform. But, in an amazing show of confidence, Snapchat founder, Evan Spiegel, turned down the offer with a long-term view of growing the business. Today, Snapchat has over 200 million users and growing and is valued at over $22 billion. No wonder people consider the $1 billion acquisition of Instagram a steal, given its user base of over 400 million people today.

In fall of 2013, Snapchat introduced Snapchat Stories, which has since become Snapchat’s power feature – the ability to create slideshows of your life through photos and videos. The experience is almost rough and clunky, giving the appearance and feel of being more “authentic” and real. It was around this time that Facebook, after its failed attempt at copying Snapchat features through a new app called Poke, decided to offer $3 billion to acquire the growing photo chat app. Ever since Snapchat turned down Facebook, Snapchat and Facebook/Instagram have increasingly competed over features to captivate their users’ attention. For example, in August 2014, Snapchat launched Live – a feature that allowed users to follow (and contribute to) live events. In January 2015, Snapchat launched Discover – a feature that enabled users to discover new Snapchat Stories and content from publishers and influencers. Later, in June 2015, Instagram launched a new Explore page enabling users to discover trending content and places based on its users engagement (similar to Snapchat Live). In September 2015, Snapchat acquired Looksery to power its new animated lenses feature, dubbed “Lenses”. And, in March 2016, Facebook acquired MSQRD, which offers similar imaging features. So, it was only a matter of time before Facebook attempted to copy Snapchat’s power feature. This time, though, it may work.

Should your brand use Instagram Stories or Snapchat Stories?
Instagram Stories already seem to be getting plenty of engagement. The stories appear on the top of your Instagram app and seamlessly integrate into the Instagram experience. I’ve been seeing a range of brands, influencers and regular users (friends that I follow) testing out Stories, and it’s a fun addition to my content feed. Given the head start that Facebook/Instagram have on Snapchat in developing their ad tech and revenue model, I can see Instagram Stories hitting a positive nerve with brands as a great way to elevate the content that they share on Instagram and, eventually, targeting new audiences with promoted Instagram Stories.

But, as usual with social media, there is no clear cut answer as to whether or not a brand should participate in Instagram Stories or Snapchat Stories.

A good place to start is comparing the core users for each of the platforms with the audiences your brand hopes to reach. Snapchat’s core users are 13 to 24-year-olds, falling squarely in the Gen Z bucket. Furthermore, 77% of college students use Snapchat. And, the platform touts ~100 million daily active users amongst its ~200 million total users. Meanwhile, Instagram’s core users capture both Gen Z and Millennials: 41% of its users are ages 16 to 24, and 35% of its users are ages 24 to 34. Instagram touts ~75 million daily active users amongst its ~400 million total users. Some fast math will tell you that Snapchat and Instagram likely capture a similar number of Gen Z users, while Instagram also gives a brand access to the Millennial audience that is growing in buying power.

So, if your brand’s target audience falls within these core user bases, then it’s time to experiment and test which platform proves to support your business goals.

How to use Instagram Stories
This video from 9TO5Mac provides an excellent tutorial on how to use Instagram Stories.

*BONUS: How to use SnapChat
Many people over the age of thirty find Snapchat daunting and intimidating. If you haven’t explored Snapchat yet, below are two must read blog posts from Mark Suster explaining the platform: how to use it and why it’s important.

Now get out there and experiment.

A Contrarian View on Innovation in Advertising & PR

Lifecycle of a Technological Revolution_today

With the revolution of media and technology disrupting the marketing industry, and business models altogether, marketers are trying to navigate through the storm. On the communications side, TV dollars are shifting to digital. But, digital ads aren’t nearly as effective nor transparent as we want them to be. The traditionally distinct and siloed roles of marketing communications (once upon at time, just known as ‘advertising’) and PR are converging.

Because of the advent of social media, and the frustration with traditional and digital advertising, marcomm is moving into earned media with influencer marketing, native advertising and more responsive campaigns and editorial content teams. Because of the rise of the new influencer – everyday people and celebrities using blogs, YouTube, Twitter, Vine, Instagram, SnapChat, Periscope and other platforms to create personal media companies – PR is expanding beyond traditional media relations and ‘the pitch’, and into influencer marketing, sponsored content and responsive editorial content teams as well. It’s a race to the middle where the lines are blurred. That’s why agencies and publishers are partnering to create wholly new content companies that service brands.

If we take a step back from the race, though, things haven’t changed much since 2009. The big three: Facebook, YouTube and Twitter had launched and matured as three distinct and valuable social communications platforms for users. Since then, other social platforms have launched – Foursquare (and Swarm), Instagram, Pinterest, Vine, SnapChat, Meerkat and Periscope being the most touted. But, each of these just feels like an iterative evolution of the discontinuous leaps that Facebook, Twitter and YouTube made. Platforms, and the content they enable, shifted to become more visual, shorter and ephemeral. When Meerkat and Periscope launched, didn’t it feel like they already existed? And, the fundamental rules for how to engage audiences on those platforms is the same; we must adhere to the Reciprocity Theory.

So, I actually take a contrarian point of view: innovation has slowed in media technology. We’re at the tail end of our current technological revolution’s lifecycle, moving past the discontinuous revolution and into the iterative evolution. While folks in the industry are making claims that: “Advertising is dead.” Or that, “Data will tell us what content to make, so we don’t need creatives anymore.” I’m claiming that we need creative more than ever. The discipline just needs to evolve too. As the roles of advertising and PR converge, storytelling becomes an even more critical discipline for marketing.

Just pushing the message through TV and radio and print and display ads is lazy creative and lazy advertising. Great creative has always been about great storytelling. Now we just tell that story across new media platforms/channels in partnership with the new social influencers and in partnership with our customers. Sometimes those influencers and customers are the same. Great creative (‘the story’) is the glue that holds the story together, wherever we’re telling it. It’s what inspires people to participate.

In the late 2000s in the entertainment industry, we began exploring transmedia storytelling. This is where we would develop a core story – characters and the world in which they lived. And, then we’d plan out those stories across media (books, graphic novels, movies, TV, web series). It was a shift away from the linear model of: writer publishes book –> studio buys book and makes movie –> network turns movie into TV series. Instead, we developed it all at the same time. They lived together as extensions, or chapters, of the same story instead of separately as different and distinct adaptations of the story. This style of storytelling became particularly popular in the fantasy/gaming/comics genres, as we could delve deep into the story of a world we were creating.

Now, in marketing, we have the opportunity to take the same approach. How do we create a core story – the story of our brand, which reflects the story of our customers and employees – and tell that story through new (and traditional) media platforms and people? Like a vision, the story we tell requires an intuitive leap of faith. It must inspire. It must create new possibilities. Is that so different from great advertising fifty years ago? Maybe. Maybe not. But, in an increasingly ephemeral world, wouldn’t it be nice to have some moments that impact and last?