Category Archives: online

The Amazon Dash post

At the end of last week Amazon unveiled Dash an accessory to aid ordering from its Fresh grocery service. Fresh promises free same-day delivery on orders of over $35 of more than 500,000 Amazon items including fresh and local products; including products from respected restaurants and coffee shops. It has been rolled out in three major US markets: San Francisco, Seattle and Southern California.

Fresh has a mobile application on both Android and iOS to aid in shopping – which makes the launch of Dash much more curious. Dash is a piece of dedicated hardware which implies a failing in terms of ease-of-use for the smartphone application. Amazon obviously thinks that Fresh customers will be heavy high-touch, high-value consumers in order to spend this much trouble engineering and manufacturing the hardware and supporting services to make Dash work.

Dash is a product that wouldn’t be out of place in a collection of Braun kitchen appliances. It’s hardware interface so simple it looks really intuitive.

The Dash can be seen as part of a wider movement from converged general purpose devices to dedicated hardware. It is interesting to compare and contrast the Dash with the :CueCat; how just over a decade can make such a difference to a product.
Web 1.0: Cue Cat
Back in 2000, Wired magazine sent out the :CueCat to US subscribers of their magazine. The :CueCat was a barcode scanner that allowed readers to augment the print content with a link to web content. Think a prehistoric QRCode. It didn’t work that well for a number of reasons. The codes were proprietary, partly due to consumer privacy requirements and intellectual property around barcodes. In order to use the :CueCat one needed to be connected to an internet-enabled PC via a wired USB or PS2 connection. Using the :CueCat was no easier than typing in a URL or searching via Google; a search engine on the ascendancy at the time. The :CueCat was a spectactular failing for the media industry looking to get to grips with digital media.

Moving forward to the Dash, the equivalent computing power of that desktop PC has been squeezed into a device that fits in the palm of your hand. Wireless connectivity provides a more flexible connection that removes contextual restrictions on the Dash compared to the :CueCat. The web extended computing so that the website and the PC or mobile device in a symbiotic relationship where it isn’t clear to consumers just were one starts and the other finishes.

The Dash takes inputs via a product barcode and voice memos. Despite the technology advances over the past ten years with the likes of Siri and S-Voice; there will likely be some sort of human intervention required to make these voice memos work. This is at odds with Amazon’s warehouse robot systems and lack of a human customer service face over a telephone line.

This voice memo challenge is not trivial, it was a contributing factor in SpinVox’s failure. The Fresh programme because of its logistical challenges will be hard to scale, and the economics of the Dash have to be carefully balanced between existing products that are repurchased via barcode scan and new or fresh products that would use the voice memo. Acquiring basket growth becomes incrementally more expensive. Over time the system may learn voice commands rather like Google’s old telephone-powered search; on the one hand local area focus is likely to limit dialect variations, on the other sample size maybe hard to scale to be statistically significant for machine learning.

Amazon Dash
More information
Same-day delivery’s for suckers – now a Chinese ecommerce giant has three-hour delivery | PandoDaily
AmazonFresh
Amazon Dash
SpinVox: The Inside Story | The Register
The 50 worst fails in tech history | Complex

Messaging’s middleware moment

Back in the mid-1990s Microsoft missed out on the web as a nascent platform. In fact the first edition of The Road Ahead that Bill Gates wrote alongside Nathan Myhrvold and Peter Rinearson saw the Internet as one of the “important precursors of the information highway…suggestive of [its] future” (p. 89); he noted that the “popularity of the Internet is the most important single development in the world of computing since the IBM PC was introduced in 1981” (p. 91) but “today’s Internet is not the information highway I imagine, although you can think of it as the beginning of the highway“, the information highway he envisioned would be as different from the Internet as the Oregon Trail was to Interstate 84.

One reviewer noted that

World Wide Web receives just four index citations and is treated as a functional appendage of the Internet (rather than its driving force)

And for a while Netscape had a clear run at the browser market, building up to one of the largest IPOs ever. One of the things that made Netscape so dangerous was that the browser became the gateway to applications like sales orders, email or looking up a database and the browser became an operating system substitute. It no longer mattered so much if you had a Mac or a PC.  The browser and web effectively became middleware.

I realised last year that messaging services like KakaoTalk, WeChat and LINE were moving beyond messaging to becoming something more. By becoming platforms they could provide a richer experience to users, the integrate:

  • Gaming
  • A blogging-type platform
  • Payments
  • Social commerce
  • Travel information

This looks eerily close to Netscape’s web of middleware positioning in the mid-1990s. Ted Livingston, CEO of Kik outlined just this scenario in an article on the messaging landscape for Techcrunch last week.

Where this gets interesting is when think about what this means for the likes of Google’s Android operating system or Microsoft Windows phone, where the raison d’être of these operating systems is as a gateway to web services (and an audience for mobile advertising). The more functionality that happens inside the messaging application, the less opportunity there is for the likes of Google and Microsoft to direct the consumer towards their advertising inventory.

It corrodes the very reach Google tried to achieve by having its own smartphone operating system and competing with Apple. Google is already under assault in the operating system itself as Chinese vendors like Xiaomi and Oppo alongside Amazon have customised their own operating systems based on Android.  Google services are not provides on a third of Android devices sold already, messaging applications as a platform exasperate the situation further.

More information
After WhatsApp: An Insider’s View On What’s Next In Messaging | TechCrunch
`Road Ahead’: Gates And Our Pc Future | Seattle Times
After WhatsApp: An Insider’s View On What’s Next In Messaging | TechCrunch
Netscape’s Internet OS | Dave Winer
US versus Microsoft: proposed findings of fact | U.S. Department of Justice
Chrome OS: The ghost of Netscape rises to haunt Microsoft | betanews
Netscape complaint | Harvard University Berkman Center Openlaw site
Rise and Fall of Netscape Browsers | Strategic Computing and Communications Technology class archive University of California, Berkeley
The Browser Is The New Operating System | Techdirt

Eight trends for the future: web-of-no-web

The web as we know it was built on a set of underlying technologies which enable information transport. Not all information is meant to reside in a website to be surfed or queried.  Instead much of the information we need relies on context like location, weather or the contents of your fridge. Web technologies provided an lingua franca for these contextual settings and like most technological changes had been a long time in coming.

You could probably trace their origins back to the mid-1990s or earlier, for instance the Weather Underground published Blue Skies; a gopher-based graphical client to run on the Mac for the online weather service back in 1995. At this time Apple were working on a way of syndicating content called MCF (Meta Content Framework) which was used in an early web application called Hot Sauce.
hotsauce
Hot Sauce was a web application that tendered a website’s site map in a crude 3D representation.

A year later PointCast launched its first product which pushed real-time news from a variety of publications to a screen saver that ran on a desktop computer.
PointCast screenshot
The key thing about PointCast was it’s push technology, covered in this edition of the Computer Chronicles

The same year that PointCast launched saw the launch of the XML standard: markup language that defines a set of rules for encoding documents in a format that is both human-readable and machine-readable. This meant that there was a template to provide documents and stream information over the web.

Some of the Apple team responsible for MCF had moved to Netscape and worked on ways of importing content from various media outlets into the my.netscape.com portal; they created the first version of RSS (then called RDF) in 1999. The same year, Darcy DiNucci coined the term web 2.0; whilst this is associated with the rise of social networks, it is as much about the knitting of websites: the provision of services online, integration between websites taking data from one source and melding it with another using a web API formatted in an XML type format or JSON – which does the same job.

By the early noughties applications like Konfabulator (later Yahoo! Widgets) launched their first application to ‘put a skin on any information that you want’.
Konfabulator

Major web properties started to license their content through APIs, one of the critical ideas that Flickr popularised was that attribution of the data source had its own value in content licensing. It was was happy to share photos hosted on the service for widgets and gizmos so long as users could go back through the content to the Flickr site. This ability to monetise attribution is the reason why you have Google Maps on the smartphone.

So you had data that could be useful and the mechanism to provide it in real time. What it didn’t have so far was contextual data to shape that stream and a way of interfacing with the real world. In parallel to what was being driven out of the US on the web, was mobile development in Europe and Asia. It is hard to understand now, but SMS based services and ringtones delivered over-the-air to handsets were the big consumer digital businesses of their day. Jamba! and their Crazy Frog character were consumer household names in the mid noughties. It was in Europe were a number of the ingredients for the next stages were being created in meaningful consumer products. The first smartphones had been created more as phones with PDAs attached and quicker networks speeds allowed them to be more than glorified personal information managers.

The first phone that pulled all the requisite ingredients together was Nokia’s N95 in early 2007, it had:

  • A good enough camera that could interact with QRcodes and other things in the real world
  • Powerful enough hardware to run complex software applications and interact with server-side applications
  • A small but legible colour screen
  • 3G and wi-fi chipsets which was important because 3G networks weren’t that great (they still arent) and a minimum amount of data network performance is required
  • A built-in GPS unit, so the phone ‘knew’ where it was. Where you are allows for a lot of contextual information to be overlaid for the consumer: weather, interesting things nearby, sales offers at local stores etc

All of these ingredients had been available separately in other phones, but they had never been put together before in a well-designed package. Nokia sold over 10 million N95s in the space of a year. Unfortunately for Nokia, Apple came out with the iPhone the following autumn and changed the game.

It is a matter of debate, but the computing power inside the original iPhone was broadly comparable to having a 1998 vintage desktop PC with a decent graphics card in the palm of your hand. These two devices set the tone for mobile computing moving forwards; MEMs like accelerometers and GPS units gave mobile devices context about their immediate surroundings: location, direction, speed. And the large touch screen provided the canvas for applications.
Halifax homefinder application
Locative media was something that was talked about publicly since 2004 by companies like Nokia, at first it was done using laptops and GPS units, its history in art and media circles goes back further;  for instance Kate Armstrong’s essay  Data and Narrative: Location Aware Fiction was published on October 31, 2003 presumably as a result of considerable prior debate. By 2007 William Gibson’s novel Spook Country explored the idea that cyberspace was everting: it was being integrated into the real-world rather than separate from it, and that cyberspace had become an indistinguishable element of our physical space.

As all of these things were happening around me I was asked to speak with digital marketers in Spain about the future of digital at the end of 2008 when I was thinking about all these things. Charlene Li had described social networks as becoming like air in terms of their pervasive nature and was echoed in her book Groundswell.

Looking back on it, I am sure that Li’s quote partly inspired me to look to Bruce Lee when thinking about the future of digital, in particular his quote on water got me thinking about the kind of contextual data that we’ve discussed in this post:

Don’t get set into one form, adapt it and build your own, and let it grow, be like water. Empty your mind, be formless, shapeless — like water. Now you put water in a cup, it becomes the cup; You put water into a bottle it becomes the bottle; You put it in a teapot it becomes the teapot. Now water can flow or it can crash. Be water, my friend.

Lee wrote these words about his martial arts for a TV series  called Longstreet where he played Li Tsung – a martial arts instructor to the main character. Inspired by this I talked about the web-of-no-web inspired by Lee’s Jeet Kune Do of ‘using no way as way‘.

In the the slide I highlighted the then new points of interaction between web technologies  and platforms with the real world including smartphones, Twitter’s real-world meet-ups, the Wii-controller and QRcodes.

A big part of that context was around location aware applications for instance:

  • Foursquare-esque bar and shop recommendations
  • Parcel tracking
  • Location based special offers
  • Pay-per-mile car insurance
  • Congestion charging
  • Location-based social networking (or real-world avoidance a la Incognito)
  • Mobile phone tour guides

And that was all things being done six years ago, with more data sets being integrated the possibilities and societal implications become much bigger. A utopian vision of this world was portrayed in Wired magazine’s Welcome To The Programmable World; where real-world things like getting your regular coffee order ready happen as if by magic, in reality triggered by smartphone-like devices interacting with the coffee shop’s online systems, overlaid with mapping data, information on distances and walking or travel times and algorithms.

What hasn’t been done too well so far has been the interface to the human. Touch screen smartphones have been useful but there are limitations to the pictures under glass metaphor.  Whilst wearable computing has been experimented with since the early 1970s and helped in the development of military HUDs (head-up diplays) and interactive voice systems, it hasn’t been that successful in terms of providing a compelling experience. The reasons for this are many fold:

  • Battery technology lags semiconductor technology; Google Glass lasts about 45 minutes
  • The owner needs to be mindful of the device: smartphone users worry about the screen, Nike Fuelband wearers have to remember to take them off before going and having a swim or a shower
  • Designs haven’t considered social factors adequately; devices like Google Glass are best matched for providing ‘sneak information’ just-in-time snippets unobtrusively, yet users disengage eye contact interrupting social interaction. Secondly Google device doubles as a surveillance device antagonising other people
  •  Many of the applications don’t play to the devices strengths or aren’t worth the hassle of using the device – they lack utility and merit

That doesn’t mean that they won’t be a category killer wearable device or application but that they haven’t been put on the market yet.

More information
Fragmented Future – Darcy DiNucci
Data and Narrative: Location Aware Fiction – trAce
William Gibson Hates Futurists – The Tyee
The future of social networks: Social networks will be like air | Empowered (Forrester Research)
Groundswell: Winning in a World Transformed by Social Technologies by Charlene Li and Josh Bernoff
Welcome To The Programmable World | Wired
A brief rant on the Future of Interaction Design | Brett Victor
The Google Glass post | renaissance chambara
I like: Sony’s Smarteyglasses | renaissance chambara
The future of Human Computer Interaction | renaissance chambara
Consumer behaviour in the matrix | renaissance chambara
Eight trends for the future
Eight trends for the future: digital interruption
Eight trends: Immersive as well as interactive experiences
Eight trends for the future: Social hygiene
Eight trends for the future: contextual technology
Eight trends for the future: Brands as online tribes
Eight trends for the future | Divergence
Eight trends for the future: Prosumption realised

Eight trends for the future: Prosumption realised

The idea of consumers being the producers, or at least being part of the process within a modern industrial context was envisioned back in 1970 with Alvin Toffler’s book Future Shock. Toffler was influence by technological  as consumers started to be more involved in the delivery of their own services and products.

The first ATM machine appeared at the beginning of the 1960s and  started to be rolled out seriously in the late 1960s, this revolutionised access to money which previously relied on counter service to access their money.

The ability to make phone calls without operator intervention was technically possible since the early 1900s but it was a leap forward in electronics that saw a surge in the widespread adoption of automatic telephone switches by the likes of Western Electric, Northern Telecom and Ericsson.

The internet has extended it further, from companies delegating services to us:

  • Printing your own bill
  • Arranging you own payments to other people
  • Answering customer service questions on a brand’s behalf (Get Satisfaction, GiffGaff)

Even the job of product manager and financier has been moved over to the consumer.  Businesses like Threadless used consumer votes to decide which t-shirt designs they then manufactured and sold to those who showed interest.

Crowdsourcing platforms built on top of Salesforce are used by major corporates like Dell and Starbucks to filter new product ideas and service improvements. Crowdsourcing has been taken further with the likes of Kickstarter, Indiegogo and Demohour which allow the consumer to fund the manufacture of their product upfront. Something that Jolla copied on its own website when it launched it’s first handset.

Even marketing has been outsourced services like Buddy Bounce have the potential for fans to be a largely self-organising marketing organisation. At the moment you can see the way One Direction fans use social media to rally around their band.

More information
Eight trends for the future
Eight trends for the future: digital interruption
Eight trends: Immersive as well as interactive experiences
Eight trends for the future: Social hygiene
Eight trends for the future: contextual technology
Eight trends for the future: Brands as online tribes
Eight trends for the future | Divergence

TrustyCon 2014: Bruce Schneier talks about information security

Great video of Bruce Schneier talking about the current information security climate. The scary bit is the democratisation of exploits, what the NSA does today – will be commercial grade tomorrow. The idea of data havens doesn’t work either according to Schneier.

Schneier talks about interesting game theory going on as one gets to ‘choose one’s enemy’ depending where you base your cloud services.

Garnier’s PS Cream campaign

A really nice campaign done in China for Garnier beauty product

Cybersecurity – what everyone needs to know

I must admit I was quite skeptical when I first saw this video as my reaction was ‘yet another journalist jumping on the information security bandwagon’.  But Peter Warren Singer’s talk isn’t a bad overview for the man in the street and some of the questions from the Googlers are not bad, (I must admit I thought I might see some more nuanced questions and points from them).

The UK and it’s similarity to ancient Greece

At the moment in the UK, there is an ongoing exchange of ideas in the media and by politicians in favour of, and against Scotland becoming an independent country outside the union of the United Kingdom.  What I have noticed during my short time in country is the vast difference between London and the rest of the UK.

For as long as I can remember there were different scenes in London compared to the North. Rare groove was a very London thing, whilst acid house started to percolate through the clubs in the North of England. (Admittedly Colin Dale doesn’t get enough credit in his work championing early house in London).  Going back further, the Ska revival came out of the Midlands and Northern Soul was called that because it was played from Wigan to Stoke-on-Trent.  All Around The World Records regularly charts with singles and compilation albums that seem crass and unsophisticated to a London audience, precisely because they are aimed at audiences outside the capital.

This cultural divide extends online, tools like Foursquare have a much lower adoption rate outside the M25, part of this is down to poor mobile infrastructure – which is worse than the Swiss cheese nature of networks in London.
roflbot
The disparity between London and the rest of the country reminded me of the old city states in Greece, I don’t want to flatter London by comparing it Athens, (lets face it Tower Hamlets, Newham and Hackney are more akin to Sparta), but the difference between London and the hinterlands hints at a de-facto independence.

So what does all this mean for social media marketers? This is something that I have pondered the past few days. I think that there is a case for a definite segmentation in the approach; targeted advertising is a given so the change would more in terms of owned media. Outside London; mature platforms like Facebook, with less focus on mobile marketing. In London, a more experimental approach perhaps incorporating WhatsApp to capture mobile phone numbers (which are a more reliable ID than email addresses which can be easily churned).

I would be interested in hearing other people’s ideas on this, please feel free to put any thoughts in the comments box below.

101 marketing case study: when not to do mobile advertising

There is no point doing mobile advertising if you are not prepared to invest in a call to action that is suitable for mobile devices. Here’s an example, presumably by Ogilvy and OMD for Huawei Enterprise on how not to do it.

First up, here is the advert served up on a page of the Washington Post’s mobile site:
Untitled
I don’t want to get into the debate about the inventory itself, though I would prefer to purchase a page takeover rather than this kind of banner simply because it helps reduce clickthrough.

Here is where you are directed through to if you click on the ad, this is a non-mobile optimised page on Huawei.com. It is shrunk to fit on the iPhone screen to the point that it’s pretty much useless.
Untitled
I imagine that it would look even worse on a BlackBerry that is likely to be used by a proportion of the target audience for the advert.

The WhatsApp | Facebook post (part II)

This post follows on from my first post that looked at the valuation of the WhatsApp acquisition.

The  why
From a WhatsApp point-of-view the why is perfectly simple, everyone gets rewarded for all the hard work that has been put in building a successful product with 430+ million users around the world. It is the end pay in a classic Silicon Valley fairy tale.

For Facebook I think that the why becomes more complex and multi-faceted. If we have a look at Mark Zuckerberg’s own statement around the deal, some aspects of his explanation stood out:

  • WhatsApp is a simple, fast and reliable mobile messaging service that is used by over 450 million people on every major mobile platform. More than 1 million people sign up for WhatsApp every day and it is on its way to connecting one billion people. More and more people rely on WhatsApp to communicate with all of their contacts every day” – this is a recognition that your Facebook friends are only a small sub-set of your social graph. This point is reiterated further down in his message with: “WhatsApp will complement our existing chat and messaging services to provide new tools for our community. Facebook Messenger is widely used for chatting with your Facebook friends, and WhatsApp for communicating with all of your contacts and small groups of people. Since WhatsApp and Messenger serve such different and important uses, we will continue investing in both and making them each great products for everyone“. WhatsApp also has a lot of growth in terms of its user numbers – which I think is an ancillary benefit
  • WhatsApp will continue to operate independently within Facebook. The product roadmap will remain unchanged” – this is interesting. I once compared Facebook to an early Xerox where the company essentially acted as a cash cow to fund innovation. In Xerox’s case it was an insurance business they bought, in Facebook’s case I think that cash comes from the IPO and Facebook advertising
  • I’ve also known Jan for a long time, and I know that we both share the vision of making the world more open and connected. I’m particularly happy that Jan has agreed to join the Facebook board and partner with me to shape Facebook’s future as well as WhatsApp’s” – A few things on this; Facebook is bulking up its brain trust, and it views WhatsApp as important to get into the developing world. What this means for investors is an aggregate decreasing ARPU number. There are some incremental gains to be made such as reducing the cost of computing at the back end of running WhatsApp and taking a potential competitor off the table. It also harks back to something I heard attributed to Zuckerberg where he speculated that he may not have another idea as good as Facebook. Zuckerberg no longer needs to worry about this as he has shown he can buy those ideas

If it’s not advertising what is it?
It was quite telling that the top comment on Zuckerberg’s posting about the deal was:

Chiranjeev Kumar Dear Mark Zuckerberg, You own Facebook, Instagram and now Whatsapp. Basically, you guys have more information than NSA, RAW & ISI combined.

Facebook already has a wealth of data on a number of people who aren’t on Facebook with shadow profiles of everyone who features in many Facebook users address books but who aren’t currently members. It can see if they are in more than one users social graph. WhatsApp offers the potential to enrich this database further.

A question of identity – In many countries like China, consumers have two or more email addresses, one of which is used for circumstances when they are likely to be spammed. A mobile phone number offers a greater likelihood of relating to a real identity, as the barrier to entry on replacing your mobile number is a bit higher.

Enriched with context – every bit of data that Facebook can get about activity that occurs outside of a Facebook page helps with advertising targeting, even if the advertising isn’t served up through WhatsApp. I suspect there is a large overlap between the current Facebook and WhatsApp user base. When I think about Hong Kong which has a 50+% WhatsApp penetration and high Facebook adoption, it is easy to see how this context could enrich consumer insight for Facebook. I used WhatsApp to deal with my estate agent, building contractors repairing the air-conditioning unit and even put in my pizza order!

WhatsApp has a number of low risk untapped sources of potential incremental revenue:

One-to-one brand relationships – WhatsApp has the potential to be an opt-in one-to-one marketing channel with a personalised and enriched relationship greater than that provided by a Facebook page. Similar services are already provided on WeChat, LINE and KakaoTalk to allow brands engagement with consumers.

For example here is what the consumer sees on WeChat:
Untitled
And here is what WeChat’s enterprise dashboard looks like:
Untitled

WeChat, KakaoTalk and LINE all make money from stickers. Stickers are used in Asia as communications short hand, or as a social lubricant when it would be harder to put words to reply to a message.
Stickers
At the moment WhatsApp hasn’t developed this content fully. I am not so sure that European consumers would pay for this content but some consumers will. All of this will chip away to make the deal look better value but are still comparative drops in the bucket to help raise the WhatsApp ARPU to numbers closer to Facebook.

Partners to enemies?
All of this still makes mobile telecoms operators like Vodafone cheap in comparison to their internet cousins and it isn’t currently clear what their response will be in the coming months. Facebook will have gone from being partner who helps sell more data, to competitor corroding the SMS revenue cash cow.


Looking at data published on Twitter by Benedict Evans you are looking at a volume of messages that threatens to exceed SMS volumes. And this doesn’t include rival services such as WeChat, LINE etc, just WhatsApp; at least some of those messages will be substitutes for using SMS.

More information
Mark Zuckerberg’s Facebook posting about acquiring WhatsApp
Facebook: IPO postmortem – a dispassionate analysis

The WhatsApp | Facebook post (part I)

Gosh, where do I start, Nigel Scott asked me what I thought this morning and I replied that I was pulling together my thoughts and that I was gobsmacked at the time; I am still gobsmacked and here are my rather unstructured thoughts below.

The valuation
Ok lets talk about the valuation in bald terms first. On January 20, WhatsApp announced that it had 430,000,000 active users to date. Let’s be generous and not slice and dice what ‘active numbers to date’ actually means. Let’s also assume that they gained 10 million additional users between January 20 and today. The business has been going since 2009 so that may not be that big a step in terms of value.

When you buy WhatsApp in the iTunes store you pay roughly US$ 0.99 for the application, on Android and other platforms you get to download it for free and then pay US$0.99 each year for the privilege of using the service. For the sake of simplicity I am going to assume that they have done US$880,000,000 in total revenues to date  and US$440,000,000 over the past 12 months.

That would put Facebook as paying some 43 times earnings for WhatsApp, I believe that my revenue estimates are on the high side, so I suspect Facebook is probably paying north of 50 times revenue.

If we think about this in terms of price/user then Facebook is paying about US$43 per user for WhatsApp. It’s a high cost of acquisition but not the most expensive paid. My friend Calvin compared this deal to Lycos acquisition by Terra Networks in 2000 in an all stock deal valued at US$12,500,000,000; or US$379 per user. You could double those numbers to get an approximate modern value.

Stock versus cash
Not all money is created equal and that is especially true when it comes to mergers and acquisitions. In both the Lycos and WhatsApp deals discussed above the bulk of the purchase value was in stock. In the case of WhatsApp there is just US$4,000,000,000 in cash, US$12,000,000,000 in stock and a further US$3,000,000,000 in deferred stock for WhatsApp employees.

So essentially Facebook can pay the bulk of the acquisition by printing more stock certificates, a model that Cisco Networks pursued successfully through the late 1990 and into the late noughties. The value of that stock can go higher, or become just 0.84% in the case of Lycos if you were left holding it for long enough for the acquisition of Lycos by Daum.

On the face of it the deferred stock puts a nominal value on each WhatsApp employee of roughly US$60,000,000. Again the risk is deferred, by structuring the the release of the stock over a number of years Facebook puts all the risk on the employees.

Facebook went to IPO at 100 times revenue, so WhatsApp at 50 times revenue paid for with stock valued at 100 times revenue could look like a comparative bargain.

The high cost of looking under the hood
One thing that I found really interesting about the deal was the penalty clause involved between the two companies. If Facebook can’t get the deal to work, it ends up paying US$1,000,000,000 in cash to WhatsApp for looking under the hood.

Now obviously it shows commitment from Facebook that they want the deal to happen, but there is also a high inherent value in Facebook finding out who WhatsApp works and why has it been successful. This is also reflected in the WhatsApp employee earnout value of US$3,000,000,000. Finally it gives us a notional value of how much Facebook thinks it would cost for it to replicate WhatsApp’s success: somewhere north of US$1,000,000,000.

More information
The Facebook IPO Post (I)
The Facebook IPO Post (II)
WhatsApp | Crunchbase Profile
Why Facebook is a dead man walking
Why Facebook is a dead man walking part II?
Why Facebook is a dead man walking part 2.5?
Facebook and advertising or why Facebook is a dead man walking part III?
Facebook: IPO postmortem – a dispassionate analysis
The Facebook | Instagram post

When your PR team is bad for your brand

Disclosure: Frank X. Shaw is a former colleague of mine from Waggener Edstrom. We’ve never met in person that I can recall, at that time he was dedicated to the North American Microsoft account.

Before I get into the meat of this post I want to share with you a couple of stories.

Gay rights in Ireland
Rory O’Neill is a LGBT activist in Ireland, in many ways he is the face of the gay community being compere at events like the Pride festival. He appeared on a national television talk show and alleged that some members of the Irish media were homophobic. RTÉ was subsequently threatened by legal action and had to provide compensation to those named including the Iona Institute: a socially conservative lobby group.

This unleashed political debate Irish MEP Paul Murphy called the compensation payments

…a real attack on the freedom of speech…

When John Waters says that gay marriage is ‘a kind of satire’, that is homophobia. When Breda O’Brien says ‘equality must take second place to the common good’, that is homophobia. When the Iona Institute campaign against gay marriage because it is gay marriage, that is homophobia.

This has created an atmosphere in Ireland of enhanced empathy to gay marriage and provided Mr O’Neill with a further platform

The video was shot at the famous Abbey Theatre in Dublin and has been seen over half a million times as I write this, which is a big number given that Ireland has a population of about 4.63 million people according to the latest estimates, this doesn’t include the reach provided by media coverage of the YouTube video.  Mr O’Neill has been given a platform and an authority courtesy of his enemies that he otherwise wouldn’t have had.

McLibel
The next story is that of the UK’s longest running court case McDonald’s Corporation v Steel & Morris; or as it’s better known the McLibel case. A pamphlet was published by a small environmental group: What’s wrong with McDonald’s: Everything they don’t want you to know.

McDonald’s took five people it considered responsible to court over the claims in the pamphlet; three of them apologised and two decided instead to fight the case. The ensuing media circus around the case damaged McDonald’s reputation in the the UK, such that McJobs became a linguistic shorthand for a poor paying job with no prospects (this is actually unfair to McDonald’s at least in the UK).

The point of both these stories is that coming out reflexively against an enemy can be counter-productive. Yet we are seeing this used as a tactic more and more.

One of the most visible proponents of this tactic is Microsoft usually using Frank X. Shaw as the delivery mechanism. The latest example I noticed of this was an open letter to New York Times columnist Farhad Manjoo, but I have linked to more examples about the web.

All of this sits uneasy with me for a number of reasons:

  • Back in the day, I was told that PR people shouldn’t be part of the story. I prided myself on the fact that my work had little to no finger prints on it. Yet now Shaw is the story. One article I read introduced him as ‘outspoken Microsoft spokesperson Frank Shaw’
  • A key element of storytelling is understanding what role that you play in the story. A big brand getting involved and beating up on a journalist or blogger puts the journalist in the story as hero and the brand as antagonist. Consumers get psychological closure on stories when they subconsciously work out which ‘myth’ this is and what the plot is. You may even see other articles describe a dispute as being like ‘David and Goliath’. The attack itself become counter productive and you end up looking like Biff against a journalistic Marty McFly – to use a more modern myth ^^. It leaves a bad taste in the mouth of the audience and the media and are instead seen as a whiny little bitch or a bully

I get completely why it comes about, we live in a 24-hour world, we need to stay influential. We have moved from having a mediated discussion through journalists, fashion stylists, reviewers and radio presenters with audiences to going direct. The brand is the media. PR itself, the way it is practiced as a discipline is about ‘doing something’: what have you time tracked, what’s in the monthly report, what have you done? There are internal clients or agency clients who want to respond right away and PR agencies aren’t a place for people who say no.

Now imagine the brand as a person who responds to every slight, they would be insufferable, a pedant and possibly get locked up. What kind of dialogue does that set up with the audience, what kind of story does that tell. Brands need to move from being the antagonist in a story to being the ‘godlike figure’ that creates an inciting incident and sends our audience hero on a quest.

As my yiddish-speaking friends would say brands need to be a mensch. There you go a new concept Brand Mensch – I should be able to wrangle a book and a speaking tour out of that.

So how does a brand become a mensch? Quite simply by assessing communications through a simple set of values:
Being civil
By realising that sometimes you have to conserve your ammunition and pick your battles.

Strategic counsel for today: have your brand be a mensch.

More information
RTÉ MD of Television defends Iona Institute apology and payout as ‘most prudent course of action’ | RTÉ News
MICROSOFT PR HITS BACK AT APPLE: The iPad Is Just Trying To Catch Up With The Surface | BusinessInsider
Microsoft’s PR Boss: Here’s Why I Tweet-Slammed The New York Times’ Review Of Windows | BusinessInsider
Microsoft Responds To Google’s Extortion Claim: “Waaaah.” | TechCrunch
Microsoft honcho pleads with media: ‘Stop picking on us!’| The Register
Microsoft responds to ‘extreme’ Windows 8 criticism | CNet
Microsoft Unleashes Anti-Android Rhetoric Following Facebook Home Event | TechnoBuffalo
Microsoft PR Chief Shreds New NY Times Columnist Over His Advice Column | BusinessInsider

Thoughtful China on advertising ROI

Interesting video discussion that highlights the challenges of measuring ROI on Chinese online advertising markets in comparison to more mature digital advertising markets

I don’t think that the problem is one of demand, but one of a tension between media company interests and advertising interests. The benefits are cross platform comparison, but the challenges are technological and talent from an agency perspective.

2014: just where is it all going?

You can read about how I got on last year here. This year’s predictions in no particular order:

Amazon won’t do drone delivery in 2014 -  The reasons for this are many. Drones are limited by payload, to ability to land, the amount of energy they can hold for flight time and piloting. It is no small feat to fly a single drone let alone a parcel carrying fleet of them. Secondly, what do you do if the recipient isn’t at the landing zone? And we haven’t addressed ill-defined regulatory issues.

Small data – at the end of last year I ended up speaking to a retailer who wanted to do something with their customer database. Looking at it was underwhelming. Just over 200 customer records with only a fraction of them having email addresses. This was an extreme example, a large part of their problem was that data acquisition was done through the till, whilst customers would be paying for goods. Retail staff would then be torn between dealing with customer queues and trying to capture customer data.  Hadoop is now bandied around like it is a common tool when in reality it only benefits the largest data sets. 2014 could benefit from a renewed focus on delivering value by sorting out the small data first.

Offline to online integration – companies like cini.me, Verifone and Brightmove media for cinema and taxi advertising respectively are symptomatic of a wider move that integrates online and offline media. The holy grail would be a multi-channel customer journey with correct levels of attribution of sales. We are starting to get there with the right context data sets: location-based weather forecasts, geo-fencing and Apple’s iBeacon

Algorithmic display advertising – Greater cross-media integration would require a greater degree of sophistication in media buying, moving towards algorithm-driven purchases within a real-time scenario. The challenges will be in ensuring artwork is appropriate, rendering formats, transmission; building algorithmic models themselves and demonstrating advertising effectiveness sufficiently well.

Mobile display advertising gets a radical reduction in formats – I had been looking at the different advertising options on mobile platforms and page takeovers seemed to make the most sense, which begged the question why have other inventory options. I suspect that other advertisers may take a similar stance.

Content marketing on OTT platforms – at the moment OTT platforms like WeChat are used predominantly as electronic direct marketing pushing out regular promotions or coupons to the audience. But the platforms also the opportunity to measure the impact of storytelling by weaving the platform into a multi-channel programme alongside video and websites. For the right brands special edition stickers offer an opportunity as well.

Chinese technology brands will finally be successful outside China – Xiaomi’s vertically integrated model of hardware, software and services is looking to expand outside of China to reach a larger Southeast Asian audience. CyanogenMod-based smartphones provide other manufacturers to follow a similar model. Oppo’s N1 was recently launched CyanogenMod edition phone gained Google certification, paving the way for other integrated offering like Xiaomi, so expect software and service innovation.   Tencent’s WeChat will break through, based firstly on foreign brands looking to engage with Chinese consumers within and outside the country – expect a bridgehead to be built by the hospitality industry.

Privacy issues won’t change much with consumers – Whilst legislators may wring their hands and engineers build new products consumers won’t do much mainly because of inertia and a sense that it’s just way things are. Don’t believe me? Case in point, how many people do you know have moved their bank account, despite the UK government legislating that can now be done with just one form?

Technology company workers are the new bankers – protests in Oakland over Google commuter buses, technology sites giving Hello-esque coverage of staff canteens and luxury office and East London warping into something similar to Notting Hill a couple of decades ago, coupled with a growing army of working poor is going to create a heady mix of jealousy and the inevitable backlash similar to the student bashing that used to go on in Leeds. Expect some Hoxton twits to get twatted.

The rise of immersion – From the Oculus Rift glasses to a creative agency in Argentina using haptic technology to allow fathers to share with mothers how their child is developing as part of a marketing campaign for a babycare brand – immersive technologies are once more on the ascendancy for the first time since the mid-1990s.

Machine learning will threaten to disrupt programming – The current most popular computer science course at Stanford is machine learning, Qualcomm is looking to make machine learning based processors in 2014, this will disrupt computer programming and the schemas created by programmers across a wide range of applications from enterprise processes and workflows to consumer services like search. Whilst this won’t develop commercial applications in anger in 2014, developers may start to develop distinctly luddite tendencies.

A race to the bottom will bring out hyper-competition in mobile semiconductor suppliers – players like Qualcomm will come under price pressure from the likes of MediaTek and Spreadtrum who will provide high-quality and performance silicon at bargain basement prices to match the needs of Chinese OEMs living on razor-thin margins. Expect new operating systems and web services to take advances of these high performance bargain basement price devices.