Revolutionary Measures

Generating a network effect – why WhatsApp is worth $19 billion

As I’ve said before, the technical side of creating a new social network is relatively easy – and nowadays with cloud computing you have fast, cost-effective access to the resources you need to scale it in line with demand.

Diagram showing the network effect in a few si...

But how do you create the demand – for your social network or any other service in today’s complex and fast-moving world? Essentially you rely on the network effect – the fact that the more people use a service, the more valuable it becomes to each user. A classic example is the telephone. If one person is connected, it is worthless, but add more users and the positive effects increase dramatically – you actually have someone to call. It can also drive lock-in – if 80% of businesses use Microsoft Office there are compatibility issues for those that don’t, but who want to share documents with them.

Social networks are a classic example of the network effect in action – the bigger Facebook gets, the more people are on it who you know and supposedly want to communicate with. WhatsApp is another. It has built a base of 450 million users – 70% of whom are active on a daily basis. And as it allows free texts to be sent between users (and doesn’t cost to join for the first year), why wouldn’t you sign up to message your friends? No wonder it is predicted to hit the billion user mark in the relatively near future.

So how do you create the network effect and catapult your startup into the $19 billion bracket? There are six things I think are necessary

1              Word of Mouth
Obviously people have to know about your network or service, but traditional PR and marketing can only take you so far. What you need is people to recommend it to their friends, so start by researching and targeting the nodes of networks (i.e. those with lots of connections). If they join then their followers will as well. Approach these people and maybe even make them brand ambassadors to get them onside.

2              It has to be different
In open markets there is no point trying to simply copy what is already out there – if people are already using a service, the alternative has to be different or substantially better, if they are going to join. What issues/problems do people have that you can solve? In the case of WhatsApp it is removing the cost of sending text messages, so there is a clear advantage of moving to the service.

3              Make it easy to use (and free)
An obvious one, but if people log on and have to navigate through a maze of functions when they join, they are going to be put off. From registration to ongoing use, make things simple for people. And you have to understand and appeal to a mainstream audience – test it out on real people, rather than early adopters and fellow geeks. An intuitive user experience and comprehensive online support, including video and how to guides are a must if you are to grow. Put it where people will use it – on their mobile devices as well as PCs. And the basic package has to be free if you want to recruit major numbers of people.

4              Make it compelling
Just getting people to join is the easy part – network effect relies on them actively using the service. LinkedIn had this problem a few years back. Everyone had joined, but no-one was logging on, unless they were actively looking for a job. It changed this by adding in compelling content that aims to drive you back to the site – from the thoughts of business leaders to seeing what your peers are doing. You need to create reasons that drive people back to your site on a daily or even more frequent basis if you are going to build a solid user base. 

5              Think global from the start
When it comes to tech and the web, you need to think global. Does your proposition work in Delhi as well as Derby? The wider the target market, the bigger the potential user base, provided you make it appealing to a worldwide audience. Even if your site is initially just in English, the user experience has to be understandable by non-native speakers. As things grow you should quickly add other languages, dependent on demand.

6              Keep evolving
Nothing stands still – since its acquisition, CEO Jan Koum has announced that WhatsApp will offer voice calls on its platform, putting it in direct competition with Skype and traditional telecoms companies. You need to add new services and functions to both keep momentum going, ensure users return regularly and to recruit new ones.

The success of WhatsApp demonstrates it is less about the technology, and more about generating network effect if you want to attract a lucrative exit. Is it worth $19 billion? If it can continue its growth, introduce new paying services and bolster Facebook’s own platform it might just be.

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February 26, 2014 Posted by | Marketing, PR, Social Media, Startup | , , , , , , , , , | Leave a comment

10 changes that Facebook has made in ten years

This month Facebook celebrates its tenth birthday, having come a long way from Mark Zuckerberg’s Harvard dorm room in 2004. Hitting 1.23 billion active users and 2013 revenues of $7.87bn points to an astonishing growth in just a decade – though several researchers have tried to spoil the party by pointing out that teenagers have been deserting the social network in favour of cooler locations such as WhatsApp and SnapChat. On the flipside there’s been an 80% growth in those over 55 joining up – and from an advertiser’s point of view, which is the demographic with most money?

Facebook logo Español: Logotipo de Facebook Fr...

As the parent of a ten year old, albeit one that hasn’t delivered any revenues yet, it is amazing to see the impact that the social network has brought, not just online, but to the world around us. This is particularly true when it comes to marketing – ten years ago digital marketing essentially meant creating a website, SEO or sending out emails, rather than the relatively sophisticated profiling that is now possible through Facebook.

So here’s my top ten things that Facebook has changed:

1              Our language has evolved
Ten years ago we liked things. Now we Like them, and friend and unfriend people in the real world, as well as online. Poking publically is still frowned upon though. The language of Facebook has added and amended written and spoken English, and made it into the Oxford English Dictionary.

2              Marketers have traded control for access
If you told a marketer ten years ago that they’d move from investing their budget in their own websites to fitting their content inside the constraints of a presence on a third party network they’d have laughed at you. But essentially that is what Facebook has done – consumer marketers feel they have to follow their target audiences onto the site and interact with them, if they are to drive engagement.

3              Consumers are now in charge
The relationship between companies and consumers used to be one way and top down. The very word consumer conjured up a vision of passive purchasers lapping up whatever was marketed to them without complaint. Social networks have turned this on its head. Got a complaint? Disagree with what a company is doing? Facebook (and, of course, Twitter) provides you with a megaphone for your comments and can reach a global audience within seconds. Brands no longer have total control – as my ex-colleagues Steve Earl and Stephen Waddington have pointed out we’re now in an era of #brandvandals, that have the means and inclination to undermine corporate reputations overnight.

4              Everything happens faster
This isn’t just because I’m old, but we’ve moved from 24 hour rolling news to second by second and minute by minute activity. Move away from your computer for a tea break and you’ll be behind the curve and out of the loop. The constant need to update your status, post what you are doing and react to other people doing the same does give immediate insight, but is it at the expense of longer term perspective?

5              You cast a longer digital shadow
Ten years ago there wouldn’t be much information available online on most people. Now people live on Facebook, sharing their most intimate moments without a second thought. But unlike the offline world, this information doesn’t disappear but remains available forever. So be careful what you post as a teenager, as it may come back to haunt you when you’re Prime Minister

6              News has changed
How we consume news – and how it is collected and disseminated – has evolved beyond all recognition. Facebook profiles are the first place that journalists look for information or reaction to events. Much of our news is shared or recommended by friends rather than genuinely found through our own efforts. Consequently bite-size stories have risen up the agenda, along with a focus on cute kittens and addictive but unprovable gossip.


7              Distance is less important
It used to be that your closest friends were those you saw every day, even if the main thing you had in common was location. But now you can hang out with people you share interests with, wherever they are scattered across the globe. For many people the main focus of their social lives is Facebook, not the telephone or face to face communication any more.

8              Celebrity hasn’t gone away
Social media has allowed celebrities, from the Queen to Justin Bieber, to share their lives and build a direct relationship with an audience, unconstrained by the press. But this comes as a price – you need to actually talk to your fans and engage, rather than shutting yourself away, surrounded by minders.

9              We’re more open
Perhaps too open judging by what many people post. But the stereotype of shy and retiring, emotionally awkward Britons has been completely destroyed by the advent of Facebook. There’s no limit to what people think is shareable or that they believe their friends will find interesting………….

10           We’re beginning to grow up
Our attitude to how our private data is mined and used is changing. When Facebook began, few were bothered about what happened to their personal information – but that has changed as we’ve grown savvier about what it is worth. The next decade will see a fascinating struggle between Facebook (and marketers) and users, as each side tries to shift the needle on privacy.

 

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February 5, 2014 Posted by | Creative, Marketing, Social Media | , , , , , , , , , | Leave a comment

Be careful what you tweet (part 84)

Logo of the Kent Police.

It is tempting to devote this week’s blog to the passing of Baroness Thatcher and how it has been covered on social media. But essentially this excellent pie chart from @martinbelam sums it up  – see any newspaper for stories to prove his point.

Instead I’ll focus on more recent history – the tweets sent by the UK’s first youth Police and Crime Commissioner (PCC), Paris Brown, which have forced her resignation. At first glance there’s nothing new here – public official says something stupid online, backtracks but overwhelming moral outrage forces them out and leaves their boss (in this case adult Kent PCC Ann Barnes) with egg on their face. It’s pretty similar to all the social media cock-ups made by brands though obviously it has only come to light due to a newspaper investigation.

But what’s different here is that Brown is just 17 and the tweets (which are being investigated by the police as potentially racist and homophobic) were posted between the ages of 14 and 16. Brown denies the charges, though admits she boasted about sex, drinking and drug-taking on Twitter. Having once been a teenager in pre-Twitter times, I do remember a lot of patently untrue bragging being par for the course.

There’s two things that make me uneasy here. Firstly, how far back are we going to go to incriminate someone? Obviously these tweets are at best stupid, but she was still legally a minor at the time. I think there’s a big difference between something said while under 16 and the regular indiscretions of those in their early twenties, who really should know better.

The second, and equally worrying point, is what happened in the recruitment process? We’re told that she went through a ‘very tough’ interview process but that Kent Police’s vetting procedures didn’t include a basic social media check for someone on her pay scale. No one did even a cursory search on Twitter or Facebook and she was merely asked if there was anything in her past that could embarrass her or her job. Hardly watertight vetting for a high profile (if low paid) role.

We hear a lot about building your personal brand on social networks when looking for a job, following the right people, commenting on their posts and using the power of Twitter to make yourself memorable, recognisable and employable. In the past this was relatively easy as they could start from scratch at 20 or 21 – they didn’t have a guilty Twitter childhood as the social network only dated from 2006. Now we’re at a stage where everyone coming into the workforce has grown up with Facebook, Twitter and other networks – time for kids to either watch what they say or remember to erase their accounts when they hit 16………..

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April 10, 2013 Posted by | PR, Social Media | , , , , , , , , , , , , | 2 Comments

Do you really Like that?

Facebook Like stamp

Be careful what you like on Facebook – that’s the warning to take from research carried out by the University of Cambridge. The project used algorithms to predict religion, politics, race and sexual orientation based solely on what people chose to Like on the social network.

By correlating personality tests and the demographic information of 58,000 volunteers, the researchers were able to compare Likes with an astonishing level of accuracy. The algorithm used was 88% accurate in predicting whether someone male was gay or straight and between 65-73% accurate in guessing marital status and substance abuse for example. And it wasn’t based on simple linking – fewer than 5% of gay users clicked obvious likes such as gay marriage. Instead it used information such as likes on TV shows, films and music.

This is music to the ears of marketers (and social networks desperate to sell advertising to them). It could even help Facebook’s depressed share price perk up a little. And if you can accurately predict detailed demographic information from just one part of a person’s online footprint, imagine what you can do if you add in web browsing, search and other social network data. No wonder Google wants you to sign into its multiple services so it can collect the maximum amount of data, whatever device you are using.

From a consumer point of view there’s two ways of looking at this – most people will see it as an intrusion into their privacy and change their settings, but brands may well rationalise it as offering people exactly what they want. And as Mark Earls has pointed out in his book I’ll have what she’s having a large number of people’s decisions are herd led. So offer them an easy option that means they don’t have to think and they’ll jump at it. In many cases consumers may not even realise they are being sold to – which could be very worrying when people start being segmented on sexuality, religion or political affiliation.

So marketers need to treat this data with caution. Yes, it gives unprecedented insight but be too aggressive when using it and you’ll cause a public outcry which could damage your brand – and trigger governmental action to tighten privacy settings on the likes of Facebook.

However my own view is that we’ve been here before. Remember when store loyalty cards came in everyone predicted that we’d be laser targeted with relevant offers that drove us to up our spend? But if I get a mailing from a well-known chemists the vouchers are pretty much identical to my wife’s, with obvious male/female differences. It seems that marketers haven’t got to grips with shopping data in enough granular detail to deliver the killer offers that will drive me to automatically purchase without thinking. We may have the data, and even the technology to analyse it, but until marketers move to a digital mindset we’re unlikely to be brainwashed into buying things we don’t even know we wanted.

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March 13, 2013 Posted by | Cambridge, Marketing, Social Media | , , , , , , , , , | Leave a comment

ARM about Face?

At the launch of Tech City in 2010 David Cameron stressed that he wanted the initiative to help encourage UK ideas and entrepreneurs and pointed to Facebook as the perfect example of the type of business the area could create. Unsurprisingly given Facebook’s share price issues it isn’t a name that he’s been bandying about recently but the message was clear – content, and web-based businesses are the future for UK technology.

Unfortunately that message is wrong on a whole stack of levels. There is a place for content/web-based businesses (unless it is yet another social network)

ARM Breakout Boards

ARM Breakout Boards (Photo credit: Randomskk)

but as part of a varied ecosystem that spans different technologies rather than as the figurehead of UK Plc. Content-based businesses tend to be lean (so not many high powered jobs), use resources across the world (so not a huge investment in the UK) and can be run from anywhere, making them ultra-portable. Therefore you need a lot of them to create critical mass and actually deliver measurable benefits to the economy, rather than providing appealing photo opportunities.

In contrast, national politicians are a lot less effusive about companies like ARM that provide the technology that underpins real, physical products. In many ways ARM is essentially a software company – it doesn’t make its own chips, licensing its intellectual property to others around the world. And doing so very successfully – with over 20 billion ARM-based chips shipped to date it dominates particular sectors, such as smartphones and tablets.

Comparing ARM and Facebook throws up some interesting statistics:

  • The US social network has more employees (nearly 4,000 compared to ARM’s 2,000)
  • At current share prices Facebook is valued (even now) at $41 billion; in contrast ARM is worth a paltry $12 billion.
  • 2011 turnover for ARM was $781m, dwarfed by $3,711m for Facebook
  • Profits for the same period were $2,851m for Facebook, $350m (£221.7m) for ARM
  • But taking a closer look Facebook’s gross margin in 2011 was 76% compared to ARM’s 94.4%

Clearly Facebook is bigger, richer and earning more money – even if it isn’t necessarily paying full tax on its UK earnings. But once you add in the ecosystem of companies developing applications/chips around each company then the picture changes. ARM is at the heart of an enormous global community of chip companies, design houses and embedded engineers, all developing using its products – and paying royalties on everything they create. It has spawned a number of spin-offs, in Cambridge and beyond, and essentially created a business model that is now widely copied by other fabless semiconductor companies.

So looking beyond the hype, I firmly believe that ARM has delivered much greater benefits to the UK economy than companies like Facebook. It has built up our skills and innovation base, contributed to the formation of the Cambridge technology hub and created opportunities for highly paid, sought after jobs. Now’s the time for politicians to recognise ARM’s success and use it as an example of what UK tech should be about, rather than solely focusing on the latest trendy web-based businesses.

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August 29, 2012 Posted by | Cambridge, Startup | , , , , , , , , , | Leave a comment

Cows, herds, social media and innovation

Cows on Coe Fen

Cows on Coe Fen (Photo credit: James Bowe)

When it burst upon the scene, social media (and indeed the whole internet) was seen as a chance for individuals to get their voices heard. Whether it was campaigning on big issues not covered by the mainstream media, providing a stage for new musical or film-making talents, just updating your family and friends or making it easier to find a new job, social media was the great leveller, removing the middlemen and letting us all be ourselves in front of a world audience.

But in fact it hasn’t really worked like that. Those with the highest number of Twitter followers tend to be established celebrities, who use it as a channel to broadcast their views and while a number of new talents have popped up from social media you get the feeling many would have made it through other means. People can share much more of their lives online, but that doesn’t mean the world is listening (or can even be bothered to find them).

This state of affairs isn’t really surprising, for two main reasons. Firstly social networks aren’t that clever. For example, they automatically suggest people you’d like to follow/friend dependent on your background and contacts. So you don’t get exposed to random influences in the same way you would if you picked up a paper, tuned into the radio or went out and physically met people at an event. You get the chance to connect to more people just like you – hardly very individual.

Secondly, seeking social approval is hard-wired into a lot of us. Going back to our early development when we needed to stick together as a tribe to survive, we want to be accepted and within the pale. So in general we’re not likely to make the effort to go off and find random connections or come up with wildly contradictory views. If you want to see this translated into internet terms just look at how quickly some things trend on Twitter or the number of comments on certain Daily Mail articles.

So we’re all part of our herds, likely to think along broadly similar lines on or offline. This makes it a lot easier for marketers (and politicians) – rather than having to deal with people as individuals you can lump them together into particular demographics and then deal with them en masse. The problem with this is that genuine innovation tends to come from the mavericks – the people that run against the tide and aren’t afraid to be different. However in an atmosphere of conformity they can be lost, or, in the case of social media shouted down by the vocal majority. And this means the opportunity for innovation is stifled and rather than someone introducing an earth-shattering new business idea, we get yet another slightly different social network launched.

But all is not lost as there are genuine new ideas out there. And rather than heterogeneous clusters such as Tech City, the majority are coming from academic research, in Cambridge and elsewhere – where blue sky thinking is encouraged. Not every idea will work, not every idea is practical, but it provides an antidote to the herd mentality. And as we become more and more reliant on social media we need to encourage and fund this left field innovation and take the time ourselves to look further afield when we widen our own circles on social networks.

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August 13, 2012 Posted by | Cambridge, Marketing, Social Media, Startup | , , , , , , , , , | 1 Comment

MicroSocial?

There are a lot of people convinced that what the world needs is another social network. After all technically they’re pretty simple to set up and if half the world is on Facebook, there’s still plenty of opportunity to recruit members.

Image representing Microsoft as depicted in Cr...

Image via CrunchBase

I’m being flippant, but in a week that saw Microsoft launch two forays into social networks, I think that’s time for a reality check in the area. To be fair to Microsoft, the mooted $1bn acquisition of social enterprise platform Yammer is a logical move. It means it can add collaboration and social network style features to Microsoft Office, helping tighten its grip on enterprise desktop software. Essentially it’s meeting the continuing corporate desire to help share information and enable collaboration that has been going on since the launch of Lotus Notes and intranets 20 years ago. So, social network yes, Facebook competitor no.

Microsoft’s other new social network So.cl is a lot more difficult to fathom. Described as ‘an experiment in open search’ it is designed to be a layer on existing social networks, with a particular focus on social search (something that Microsoft’s Bing search engine is also majoring on). All a bit confusing and really lacking a killer reason to sign up. I can only guess that successful bits of So.cl will be integrated into Windows Live and Bing – but that really relies on people using the service to test it and see if it works.

I’ve talked before about how any technology (including social networks) has to cross the chasm into the mainstream from early adopters if it is to be a lasting success. Another useful bit of business development thinking is that in mature markets there are essentially four positions to be in. You can be the market leader (Facebook), the follower (LinkedIn), the challenger (Google+) or successfully own a niche (such as Twitter). Outside these four it is difficult to build the scale you need to succeed as a decent sized social network – it really relies on getting people to sign up and use the service on an ongoing basis. As Apple has found with its Ping music social networking service, which is rumoured to be closing, brand name and access to a potential audience isn’t enough to get people to sign up.

So whether you are marketer or a social network startup take a good look at the business development textbooks before you launch and ask yourself does the world really need your social network?

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June 18, 2012 Posted by | Marketing, Social Media, Startup | , , , , , , , , , , , , | Leave a comment

Disconnecting at LinkedIn?

LinkedIn Centipede Participants in the 2010 IN...

LinkedIn Centipede Participants in the 2010 ING Bay to Breakers (Photo credit: smi23le)

We’re clearly doing much more of our business networking online, so why isn’t LinkedIn more of a success? Obviously it has a huge number of registered users (over 150 million globally according to some figures) and revenues last quarter of $167 million, but it doesn’t seem to be able to take centre stage in the same way as Facebook. People use it, but in many cases more out of duty than desire.

So what’s LinkedIn doing wrong? Here’s three key things I’ve picked up, with additional points from an entertaining Pitch and Mix discussion on LinkedIn a few weeks back.

Just not clever enough
Having the CVs and career details of 150 million people should allow LinkedIn to both suggest serendipitous connections and also flag up relevant jobs to members. Yet I tend to get the same new connections suggested, simply based on my existing network. Putting a bit of intelligence behind it how about suggesting people based on my interests, location and profile, rather than just the groups I belong to? And, while this may just be me, the jobs that are flagged bear no relation to my experience level – unless LinkedIn really believes I should start again as a PR account executive?

Push to monetise subscribers
Obviously LinkedIn isn’t a charity, it’s a public company, but over the last year I’ve seen a creeping change as the network tries to push people more towards premium subscriptions. Less information is available for free and all you can see on many profiles are basic details. It doesn’t encourage me to expand my network if I can’t tell if someone would be a good contact or not.

Spam, spam, spam
LinkedIn Groups are a great resource to discuss relevant issues with like-minded people. Or they would be if they weren’t regularly invaded by spammers and people trying to sell me a new website. Ditto random invitations from people within groups that I’ve had no interaction with at all. I know a lot of this is down to those that run the groups but it is LinkedIn that suffers as people abandon potentially useful groups and consequently don’t log on as frequently.

Don’t get me wrong – I believe LinkedIn is a great resource. It just has to focus on its users and their needs if it is continue to grow and provide the right service to the B2B community.

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March 20, 2012 Posted by | Marketing, Social Media | , , , , , , , | 2 Comments

Facebook+

Quel ricco sfondato di Mark Zuckerberg, founde...

Image via Wikipedia

Your biggest competitor is launching a new product that attacks your dominant market leader head-on. What do you do? You don’t want to look desperate but equally you can’t ignore it.

If you are Facebook responding to the launch of Google+ the answer is simple – infiltrate it. Founder and CEO Mark Zuckerberg allegedly joined the fledgling social network on launch and is now the most popular user, with more followers than Google founders Sergey Brin and Larry Page.

Of course, the account may be fake but I’d like to hope not given this is a brilliant PR tactic that means Facebook wins whatever happens. If Google had blocked Zuckerberg he could have complained to the media about a lack of openness. And as they’ve let him in he can ensure Facebook is central to the story. I’d imagine that Google execs are frantically drumming up followers for Brin and Page to unseat Zuckerberg from the Google+ throne as I write………..

 

 

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July 7, 2011 Posted by | PR, Social Media | , , , , , , | 1 Comment

There is no private life anymore

Image representing Ted Shelton as depicted in ...

Image by Judge Business School / judgebusinessschool via CrunchBase

I’ve previously blogged about how social media is leading people to give away a lot more of their personal details than in the past, often unknowingly. This then triggers a backlash (such as with Facebook’s recent face recognition update), but the general trend is towards openness/lack of privacy (delete depending on your viewpoint).

Discussions at last week’s CUTEC Technology Ventures Conference brought this topic to the fore. Serial Silicon Valley entrepreneur Ted Shelton shared his views on innovation, pointing out that the three driving forces of social, mobile and cloud are driving true market disruption. But what caught my attention was his later, bold statement – There is no gap between public and private life anymore. Ted sees this as a force for good – making people more reflective about their private actions as they directly impinge on their public persona. And the more you share, the more people will share back and the faster you will learn.

I agree with the positives, but there are a number of issues that trouble me. First off, I think people are becoming less, rather than more reflective – happily sharing private information that either directly, negatively impacts their lives or alternatively bores people to death. And current technology doesn’t give you the ability or time to build and demonstrate your complete persona online. You have to show just parts of it – your Twitter profile is a few lines, not the length of War and Peace, meaning that by default you need to focus different social networks on particular traits or areas of your life. So, for now at least I’ll stick to partitioning my public and private life – to avoid embarrassment if nothing else.

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June 13, 2011 Posted by | Uncategorized | , , , , , , , , , | 4 Comments

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