Why You Should Delete Facebook from Your Phone

Larry Page the CEO of Google’s parent company, Alphabet, famously told the New York Times that when he looks to purchase a company, he asks whether it passes the toothbrush test; Is it something you will use once or twice a day, and does it make your life better?

At first glance the statement seems perfectly innocuous and almost noble when you think about technology making your life better, but the reality is far more pernicious. Unlike brushing your teeth, something we are taught to do from early child hood, in order to preserve our gums and have healthy teeth, for internet companies the equivalent is finding ways to ensure we get fixated with and completely addicted to their products.

This type of addiction to Facebook, Google, Amazon, LinkedIn or Netflix has nothing to do with making us healthier or better human beings; in fact it is having exactly the opposite effect on our brains, mental well-being and state of happiness.

Merriam-Webster describes addiction as;

1: the quality or state of being addicted

2: compulsive need for and use of a habit-forming substance (such as heroin, nicotine, or alcohol) characterized by tolerance and by well-defined physiological symptoms upon withdrawal; broadly: persistent compulsive use of a substance known by the user to be harmful

There is a reason Silicon Valley does not use traditional business metrics like earnings, sales or revenue to measure an acquisition target, instead they look at ‘stickiness’ or addiction in terms of how often users interact with the app on a daily basis.

Until now we thought about harmful addictions primarily in terms of substance abuse because it is easier to see the visible and physical effects on someone addicted to drugs, alcohol or sex; with the internet and social media, the addiction is more disarming and harder to see. We can all agree that most addictions are bad for human beings, and scientists and researchers are just now starting to see the detrimental effect smart phones are having on our intelligence, social skills and declining levels of happiness.

I understand that this is a hard thing to get your head around because few people will be able to imagine navigating daily life without a smartphone. It is how we stay in touch with friends, share kid’s milestones with family, communicate with co-workers, stay on top of breaking news, search for answers and even solve complex work problems, as well as what we turn to for entertainment during commutes and down-time. Nobody is suggesting we power down our phones and move back into caves, but it is important to understand the harm of constant use and without conscious boundaries.

A recent Wall Street Journal article cites a number of independent research studies reaching the same dangerous conclusion that the “integration of smartphones into daily life” appears to cause a “brain drain” that can diminish such vital mental skills as “learning, logical reasoning, abstract thought, problem solving, and creativity.”

To keep us addicted, each service needs to constantly invent new ways to get us to spend time within their apps and to do it many times a day. This is how Facebook, BuzzFeed, Instagram, Reditt and every other similar service make money – the more often we use it, the more likely we are to see an ad, and thus the more valuable their service becomes to an advertiser.

There are only so many baby pictures and cat videos one can watch. After a while the bit of content vying for our attention needs to become more and more outrageous and sensational to command our repeated attention. It is this vicious cycle in a race to become the most addictive that is driving all their content into the gutter, as we saw with the mass proliferation of fake news across all news and social media platforms in the last US election.

People will argue that we have dealt with many captive and unhealthy mediums over the centuries and mankind has not only survived, but thrived, and this is true; but unlike cinema, radio, television or computers, we have never before been able to immerse ourselves in these things twenty-four hours a day, seven days a week and have them within our reach from the moment we wake up to when we sleep.

The same WSJ article explains this fundamental difference with a mobile phone in this way: “Imagine combining a mailbox, a newspaper, a TV, a radio, a photo album, a public library and a boisterous party attended by everyone you know, and then compressing them all into a single, small, radiant object. That is what a smartphone represents to us. No wonder we can’t take our minds off it.”

Another study, published in the American Journal of Epidemiology, found a direct connection between increased Facebook usage and decreased well-being; “And the team says their findings show that “well-being declines are also a matter of quantity of use rather than only quality of use.” Even if we were to argue that adults are generally more capable of dealing with this type of addiction, which the data says is not true, we must consider the devastating effect it is having on younger minds.

Jean M. Twenge, a professor of psychology at San Diego State University who has been studying generational differences for 25 years, recently wrote an article in The Atlantic on this issue. She found that “there is compelling evidence that the devices we’ve placed in young people’s hands are having profound effects on their lives—and making them seriously unhappy.” She concludes that “there’s not a single exception. All screen activities are linked to less happiness, and all non-screen activities are linked to more happiness.”

I am not suggesting that Facebook, LinkedIn or Google are evil; in fact in the grand scheme of life they have done much more good than bad. The issue is the frequency with which we engage with our apps based on having our mobile phones tethered to us 24×7, and the incessant and constant need to consume information via the built in alerts and notifications, which are designed to distract us from life and encroach on our minds in unhealthy ways.

I understand that it is not possible to live without Facebook and Google or a mobile phone today, but there is no reason why we need to have access to and distraction by these services twenty-four hours a day. My suggestion (and this is what I have done) is to delete Facebook from your phone, because it is the MOST distracting and harmful social platform of the lot and then turn OFF your notifications on all the other apps barring maybe two or three news sites.

This way you will still have access to everything but will be in total command of when and where you do, and no longer be a slave to their alerts and notifications.

I promise you that you will be much happier and science says your mind will be much healthier.

The Big Opportunity with Virtual Reality

Virtual reality (VR) is being touted as the next big thing and venture capital firms are falling over themselves to give money to companies experimenting with the technology. There is also growing interest in mixed reality (MR), which is an augmented version that lets you use the real world as the backdrop to navigate VR objects placed within it. The MR experience is considered more real and believable, compared to VR, as the latter happens in a world that is entirely make believe. Here is a great Wired article on VR and MR which spurred my thinking and brought about this blog.

Turns out that VR technology has been around since the 1990’s but it was cost-prohibitive to mass produce. With the proliferation of smartphones, which have brought down the cost of sensors and created super computers that fit in our pocket, VR is finally ready to come of age.

It would be fair to say that Oculus Rift marked the turning point that resulted in VR going mainstream. Oculus started in 2012 as a Kickstarter project to build a VR gaming headset and quickly became a household name. In 2014 they were bought by Facebook for $2 billion. Since that moment there has been something akin to frenzy among the top tech companies to get into VR. Microsoft recently started shipping its HoloLens to developers (Source: Verge article). Verizon’s AOL bought a 360-degree VR video company called RYOT (Source: Wall Street Journal article). HTC, Google, Sony, Samsung, Apple and a host of other companies have launched VR products or are in the process of developing them.

However, all these companies are currently thinking about VR only through a lens of gaming and commercial applications like movies, tourism and for various new ways to market their products and services. It is great for companies to invest in innovation to find better and more effective ways to sell us ‘stuff’ but I believe that focusing entirely on the commercial aspects would be missing a much greater opportunity.

Here is the line in the article that sparked my thinking:
“People remember VR experiences not as a memory of something they saw but as something that happened to them.”(Source: Wired article).

In my mind, the greatest flaw we have as human beings is the inability to see through someone else’s eyes and, therefore, to empathise with them in a truly meaningful way. It is almost as if we are conditioned to personally experience a situation before we can fully appreciate and understand it on a deeper level. This is why it is often hard for us to truly empathise with people and situations that we have never experienced.

For example, most people get involved or start donating to Alzheimer’s and cancer research only after they have lost someone close or witnessed the disease first hand. Similarly people born rich are unable to appreciate the daily hardships and obstacles faced by families that live paycheque to paycheque, and simply view them as lazy or less hardworking.

Most people cannot fathom the daily experience of people of colour and the toll racism takes on a person’s self-confidence and self-belief. It is also very hard for any of us to imagine the emotional scarring that occurs, often for life, on victims of abuse. When there are no overt physical manifestations and scars, people struggle to feel a depth of compassion that might lead to action or a change in behaviour.

Now, let’s go back to the statement from the article; “People remember VR experiences not as a memory of something they saw but as something that happened to them.”

Now, imagine if we could develop VR and MR tools that will allow Presidents to walk virtual battlefields, before making the decision to go to war. I guarantee that they would not make it as lightly as they do today. Imagine if convicted murderers could see the hell they leave behind for victim’s families. What if skeptical lawmakers could live through the eyes of refugees fleeing war-torn countries? And college freshmen were able to witness the damage they do with a drunken but forced hook-up (not the actual act of rape but the aftermath). Imagine if Donald Trump could spend a day as a Muslim woman.

Think of it as an education tool to help us make better life choices and wiser decisions by building greater empathy, not as a brainwashing tool. I believe there is a greater potential for VR, and especially MR, that goes beyond experiences designed to create entertainment, one that could truly help us become more humane, compassionate and wise.

CEO’s of companies like Facebook and Google love to talk about their altruism. They want to give back to society by solving some of the biggest problems using technology. But because their motives are driven by profit (which allows them to fund these initiatives) we tend to end up with flawed initiatives like Facebook’s Free Basics.

So instead of Mark Zuckerberg and Sergei Brin playing God by holding onto innovations and breakthroughs in VR, to develop a narrow set of products that suits their commercial purposes (which they should still do), why not also open source all the research and code and allow the world to build off it and find many more commercial, altruistic and innovative uses for this technology.

Seeing life through someone else’s eyes is unequivocally the greatest power and gift we can give mankind and who knows, it might be the one thing that can help save us from ourselves.

Why Facebook, Twitter, Netflix and Others Have Personalisation Wrong.

Today, it is hard to escape digital technology’s great promise of personalisation and customisation. Every company under the sun is touting tailored customer experiences. One based on learning about individual habits, preferences and interests; driven by our past behaviours, choices and actions.

Every advertiser and marketer swears the new ‘holy grail’ of connecting more intimately with customers, and they are racing to build algorithms and artificial intelligence that gets better, as it learns, at predicting future decisions based on past behaviours. They learn about our interests, hobbies and consumption habits in a bid to sell us more of what we ‘want’.

Amazon recommends products based on our purchase and browsing history. Netflix suggest movies based on our viewing history. Delta sends us special deals based on our travel history. The Wall Street Journal recommends news articles based on our reading history. Facebook shows us posts in our news feed based on our ‘likes’, and even the screensaver image on my PC asks me to like the pictures I want to see more of – well, you get the picture.

However, I believe every one of these companies has got it wrong. There exists a fundamental flaw in the way they are approaching personalisation, one that does not truly deliver on the greatest promise of the internet and digital technology.

The internet, beyond connecting the world, allowing us to share, engage, collaborate – is about discovery. The ability to discover new peoples, cultures, places and even points of view. It has the ability to open our minds, widen our worldview and expand our horizons through discovery; so why show us more of what we already know, like, see and do?

It is great that technology has allowed companies to peek into our daily lives (for those who opt-in), and digital tools in turn allows them to deliver experiences and messages uniquely tailored to us. But here is what I want them to do with this power – use it to deliver on the greater promise – one that opens each of us up to new ideas, enables us to experience new things, and even challenges conventional beliefs and viewpoints. Let’s use it to experiment with broadening our worldview; rather than limiting it based on what we already see and do.

Only by doing this can we begin to unlock the potential of the human mind and deliver what I believe to be the holy grail of technology.

Today, Facebook’s feed algorithm works to show us more of what we already like. The same holds true for Twitter or CNN’s article suggestions and the principles behind every other personalisation algorithms – they are designed to show us more of what find most agreeable.

As a result there is little debate and no authentic discussion because we are in essence talking to ourselves. More importantly we learn nothing new, if we don’t have the opportunity to experience views, ideas and thoughts that are very different from our own.

Currently, technology is only perpetuating our natural human instincts to find and then quickly form safe, secure and comfortable tribes and online havens. Yet, societies only make progress through discord, based on debating conflicting ideas and diametrically opposed views, before the majority can find common ground and reach consensus to move forward on the most contentious issues.

My challenge to every company is to start applying a different set of principles their algorithms and in doing so redefine the idea of ‘personalisation’ along the following lines:

40% what I already like
+ 40% things that are new and different (stretch my worldview)
+ 20% that I will dislike/disagree with (challenge my thinking)

Now imagine what your Facebook and Twitter feed, Netflix recommendations, Open Table picks and Fox News or CNN article suggestions will begin to look like. I guarantee they will be richer, more rewarding and in time will also help us bring back civil dialogue and respectful debate on both the most divisive political and social issues; not to mention that our minds and society will be richer for it.

How Facebook Can Fix Internet.org

When I first heard about this initiative, called internet.org, I was thrilled and thought it extremely charitable of Facebook to give free mobile internet access to the poorest people in the world. People for whom the decision often boils down to choosing between adding a data plan and putting food on the table. It just felt like the right way to give back; for a large, super wealthy corporation that has profited from a free internet. The logic seemed altruistic; access to knowledge empowers more people. The mission almost poetic; provide free access to “two thirds of the world that doesn’t have internet access.”

The one thing that struck me as curious is that Facebook was always included in the basket of so called “basic services” they were providing free access to; this basket included education, government, NGO, job listing, and e-commerce portals. But I was willing to accept this self-serving move for the greater good they were arguably doing.

However, as a result of neutrality debate in India, large web companies have now publicly dropped out of internet.org initiative due to a severe consumer backlash and based on how it might actually skew the level internet playing field. All this based on the curtain being lifted on a startlingly important fact, that was previously not made clear – the “basic services” internet (i.e. which websites to include in each country) is going to be determined by Facebook.

I will not waste ink talking about how this new information about the initiative clearly violates the core principles of net neutrality; while arguably trying to turn poor customers into Facebook addicts. SavetheInternet coalition has written an article here about why we should be concerned about the seemingly arbitrary and anti-competitive nature of the decisions on which services to include; e.g. in India the world’s largest search service, Google, has not been included but Microsoft’s Bing has.

With his pet project under attack, Mark Zuckerberg also penned an Op-ed in Livemint defending internet.org. While I agree with his basic argument that giving the poorest people access to “some” internet services is better than no access at all – I also believe that Facebook must let people decide which sites and services they want access to. So I want to offer Mr. Zuckerberg some suggestions on how he can fix this initiative to genuinely deliver on his mission of empowering the poor.

The way it could work is under the same basic principles they have outlines (large internet companies would still pay telecoms for the data costs, and Facebook could pay for smaller sites that cannot afford to):

1. Customers would choose from a list of the top 10 sites (based on traffic rank, in each country) for each category of basic service e.g. ‘SEARCH” would include Google, Yahoo, Bing, Ask, etc. and so on and so forth for ‘JOBS’, ‘TRAVEL’, and every other category offered

2. If necessary, for cost reasons, the total basket of basic sites could be limited to the same number allowed now; I have seen between 12-15 sites depending on the country

3. Consumers would be able to change the list of sites at the beginning of each month AND go beyond the initial top 10 based on personal experiences, level of satisfaction with a service, word-of-mouth from friends and family, or due to their own discovery on the internet

By doing this Facebook would achieve their noble goal but also ensure that EVERY person has access to a free, fair and service-competitive internet – the way God and Tim Berners-Lee intended it.

Has LinkedIn Lost Its Relevance?

For now there is no question that LinkedIn remains the go to platform for business and working professionals. It is often said that you will no longer be able to find employment without a LinkedIn profile; a whole industry of so called LinkedIn profile builders has also mushroomed around it. People who charge serious money to help navigate the platform’s features; everything from creating a profile to claiming to help you get higher search rankings and better visibility with prospective employers.

In the early days, I found LinkedIn an extremely valuable tool for professional networking. It was the best way to connect with friends from school and college, on a professional level, and with people connected to your industry. It was a tool for networking and making valuable and relevant new connections through the small degrees of professional separation we all had but never knew how to tap into. And it was the greatest way to showcase your background and professional experience, without geographic limitations, or the far more cumbersome and time-consuming alternative of physically mailing or dropping off a CV to each and every prospective employer.

Today, it is a vastly different network. For one, everybody and their uncle has a profile. Tons of random people are now able to click a button and ask to connect with you for no rhyme of professional reason; from banana farmers in Bolivia to bakers in India. I cannot count the number of times, when I ask someone why they want to connect, they tell me they accidentally hit the button or had no real reason other than finding my profile interesting. A large number of people seem to feel that by just connecting with as many people as possible, it will help them boost their career prospects and/or search rankings. I for one cannot fathom this logic because it does more damage to their prospects, if they serially invite friends of friends and random strangers to connect for no legitimate business reason.

When LinkedIn first introduced the InMail as part of their premium offering I was excited and willing to pay monthly fee to be able to reach out to people I wanted to do business with and vice-versa. It offered a professional method that did not entail having to go find common connection to get a soft introduction, or simply email someone cold. However, this feature has also turned into spam marketing of sorts. While I do still get a number of legitimate emails, I get many more from telemarketing and lead generation companies looking to sell me databases; they now just as unsolicited as those pesky tele-marketing calls we get at home.

LinkedIn is now trying to become a publishing platform; taking a page out of Amex OPEN’s book. Unlike OPEN theirs was originally a closed platform. In order to publish content you had to be classified an ‘Influencer’; and unless you were the likes of Richard Branson you were not be granted this rarefied title. I guess they realised pretty quickly that being successful did not mean that people were good writers, or able to offer meaningful content on a routine basis; at least not enough to keep it fresh and interesting for the rest of us non-influencer minions. LinkedIn has since learned this lesson and opened content posting to everyone with a profile and an internet connection. Sadly, this step in the right direction has also been rather catastrophic.

While I laud the decision to be democratic, the problem is that not everyone who has something to say has something of value to say. So while I am not suggesting that they close the doors and once again allow only super successful people or great writers to post; I do believe they urgently need to find some method to curate the vast volume of mediocre and useless content that now invades our streams every hour. The point of this curation is not to play judge and jury but to find some smart crowd sourced way to weed out the utterly useless content that only bubbles up and gets eyeballs because of sensational and provocative headlines with the content rarely ever delivering on the argument suggested.

I have found the vast majority of ‘popular’ and ‘recommended’ posts lack substance. They simply offer a provocative headline, based on recent high-profile events in the news, to bait the reader and then at best offer an extremely tenuous (and most often nonsensical) connection to the subject matter they are sensationalizing in their headline.

Recent examples of such posts are one that used the iCloud celebrity photo leak to try and link Jennifer Lawrence’s decision to bare her breasts in Vanity Fair to faulty PR and marketing decisions. Another was about sexual harassment in a CVS store that tried to make a link to sexual harassment at the workplace (which is a serious issue that this article made feel less serious). The same author just recently posted an article about the Uber PR fiasco and then halfway through started talking about the issue of rape with no relevance to her argument.

I have nothing against provocative or controversial points-of-view but the problem is that none of these articles come close to delivering on their headline’s premise; they are merely sensational for the sake of sensation. Sadly, these have overwhelmingly become the posts that seem to garner the most attention and get recommended in the Pulse stream.

If LinkedIn wants to be regarded as a destination for business-related, thought-provoking content, then this is doing nothing to further their cause and in fact damaging their credibility. It has seriously reduced my opinion of both the articles and the quality of the posters. It seems that publishing on LinkedIn is designed purely to drive eyeballs and offer no other real business insight or value; a BuzzFeed for business.

I am not suggesting that this is the end of LinkedIn by any means but that its value proposition for people like myself will erode over time if this level of ‘clutter’ and ‘noise continues to grow without substance. Even forum posts and discussions have started to suffer the same malady with people consistently asking deep and penetrating questions like “Would you rather be a good person or a good CEO” and “How do you define power in one or Two words?” As a result, I have started to drop my membership to many of these professional forums and groups on the site.

It is also not just me they should fear losing but the fact that they are about to face some serious competition for the first time; with Facebook announcing the launch of a “at work” professional network and WeWork (shared workspace for startups and freelancers) also planning to launch a networking site that would allow their physical entrepreneurial tenants, all over the world, to connect online. I suspect LinkedIn is about to get a run for my eyeballs!

Everybody’s Doing The Social Commotion…

The hype with social has become so big that a whole new industry of “social-experts” has appeared out of thin air. Just a few years ago these people did not exist or perhaps wore some other moniker when peddling their wares.

I am not saying there is no need to have a social strategy but merely that it is also important for to think about the relevance of these platforms for your product and business; think about the best way to engage your customers, based on who they are. This means that every company DOES NOT needs to have a social presence with a Facebook page, a Twitter account, a Pinterest board, or a blog. Maintaining a presence in social media is a full time job and doing it in a way that is meaningful to customers and valuable for your business – is a full team job. Few people realize that just setting them up and then posting or tweeting a few times is probably more damaging than not having it an account all. I routinely ask companies why they feel they need a Facebook page or Twitter account, and most say because everyone else has one. For me, a single person startup or small business should have many other priorities they need to be focused on before starting to worry about tweeting every few hours. And then there are also products and categories that really should not have a Facebook page – toilet papers and clogged drain cleaning brands come to mind as high on that list. Ultimately, it boils down to a little old fashioned common sense being utilized before rushing to sign up to the social bandwagon.

It takes time and work to build a solid social presence. Each new platform that you add means more work because it’s not as simple as sharing the same information across all your social pages. If you really want to build value for your business then you need to create value for your customers. This means first understanding the role of Twitter versus Facebook versus a blog and seeing how your customers are using and interacting with these platforms. Only then can you start to formulate a strategy to effectively make use of them for your needs. For example, Facebook can be an effective platform for building a community around your brand; by sharing information, starting discussions, soliciting ideas and requesting feedback on your products and/or services. It can be a great way to build loyalty through engagement and dialogue. Help to create long-term relationships with your customers and maybe turn them into evangelists; if done well. Twitter on the other hand is a great tool for more instant sharing. You can use it to announce new product launches, special flash sales and even to resolve customer complaints in real-time; as Dell and Southwest have done so effectively.

No matter which social platform(s) you decide to use there are a few things you have to be prepared to do; if you want to succeed. First and most importantly, get over yourself, your products and your services. I don’t care how great you think they are – it does not matter if you think so – it only matters if your customers do. Never use social media to blow your own horn; nothing is more off putting to an existing or prospective customer than a company telling them how brilliant they are. Second, never try to sell, sell, sell – you have sales people and channels for that. Social media is not a hit them on the head type selling tool. You can place ads for that. Find smarter and more subtle ways to offer value to your customers that will in turn lead to sales or generate word-of-mouth for your brand. Third, make sure that what you share will be of interest to your customers, beyond just your company stuff. This means not restricting yourself to tweets or posts that are always about your products and/or company. Take some leaps and broaden your horizons. Don’t be scared to follow interesting people, to be creative, human and inspirational. Share things that make you laugh and things that make people laugh about you. Share stories about your customers and even your competitors. All this helps make your brand and company come across as more secure and confident; and those are typically the kinds of brand that customers are attracted to and like to be associated with.

Finally, remember that you will need to grow a very thick skin. By putting yourself out there, and you will be if you do this well, be prepared for harsh criticism from customers and screw ups by employees (have an action plan to deal with them when they happen but don’t retreat). This is the price you have to pay to truly come across as real, in a world where very little can be controlled and preplanned. This will ultimately determine the difference between your social success and failure – how “real” or contrived your company comes across.

The Trouble with Monetizing Facebook

Aside from the fact that the CEO is a very young man who wears a hoody, I believe there are few other fundamental impediments to Facebook’s future success based on the very reasons that have made it so popular.

Think about what Facebook is at its most basic – a self-aggrandizement platform that is entirely built around feeding our obsession with me, me and me. From status updates about myself, to wall posts about things I like, to the latest gossip I want to share – it is nothing more than a one-way megaphone to the world; a modern day digital soap box for the one billion people who now use it.

I believe this has in large part been the reason for Facebook’s astounding success; it feeds into our most basic human desire to have our voice heard, in a completely unadulterated manner. Often while never having to listen or pay attention to other opinions. It is the modern day equivalent of “I post therefore I am,” as Descartes might have put it. It is as if the act of posting today guarantees the existence of self, for this socially driven over-sharing generation that has never known the world without the internet and Facebook.

Arguably, we are all better at talking than listening. We humans have always yearned to be heard, preferably without anyone offering an opposing argument or opinion. Well, there is no better place or platform to fulfill this need, than Facebook. However, this does not exactly make Facebook a great platform to get my attention as a marketer, or to try to sell me stuff when you think about it in this way. So it is not surprising to me that among the hundreds of people I know, who use Facebook regularly, not one person who has ever clicked on (other than accidentally) or bought something after seeing an advertisement on Facebook.

The other fundamental issue with Facebook and the notion of social commerce that it is trying to tap into is that people don’t buy simply based on what they see their friends or family buying. Also, not everyone wants to broadcast their every purchase, publicly. We may go see a movie that has been recommended by a good friend or perhaps have our interest piqued about one being discussed on Facebook but I know that I will never buy an i-Pad or a new car just because one (or many) of my friends bought one and advertised it on Facebook. Not to mention the fact that it would become incredibly tedious (and sometimes embarrassing) to see a continuous list of purchases made by my friend list – find me one person who enjoys seeing each and EVERY song being played by their friends…

The fact that Facebook has always been free for users also poses a challenge when it comes to monetizing any of their features or services. The New York Times is struggling to gain paid subscribers after being free for so many years. Once you set such a basic expectation with people it will be viewed as a betrayal to try and charge for something they have come to consider a right. Facebook just started to offer the ability to pay to “promote” posts, this after a failed experiment in New Zealand, where they tried charging people a nominal fee to ensure that their friends could see what they wrote on their wall posts. Not surprisingly the pay per post experiment was a complete disaster because of the transient and self-obsessed nature of the information posted on Facebook; in my estimation. Not only is it societally worthless but certainly not valuable enough to people posting it, to pay to have it seen.  Think about how many of your status updates and posts on Facebook you think are worth paying to share with your friends?

The final part of Facebook’s problem boils down to behavior and human programming. Think about how we function in our daily lives; from brushing our teeth to the brand of toothpaste we are loyal to. The rituals and routines we develop happen over time and are formed due to comfort, familiarity and a level of trust that, over time, leads to an automatic-ease and unconscious behavior.  I go to Google to search, to Amazon to buy stuff, to a news site for the latest news – why do you go to Facebook?

Facebook: Not $$$ocial Enough?

Earlier this week General Motors decided to stop advertising on Facebook. GM made this announcement “after deciding that paid ads on the site have little impact on consumers’ car purchases” according to the Wall Street Journal (“GM Says Facebook Ads Don’t Pay Off”). Albeit, the total amount, $10 million, is but a tiny fraction of Facebook’s whopping $3.15 billion in reported 2011 ad revenues, the timing was not great. It was less than one week before Facebook’s much vaunted IPO.

So while the revenue loss is paltry, there are two larger concerns for Facebook. One, GM is the third largest advertiser in the US and their announcement might lead other advertisers to re-evaluate their advertising spend on Facebook. The second more worrying thing is that it is a major blow for a young company trying to convince the world that “social advertising” is not only effective but provides Return on Investment (ROI). In the short-term the impact may not be that great simply because Facebook is about to reach 1 billion active users (approximately 14% of the world’s population); and this number alone is hard for most advertisers to ignore. But as a public company, with shareholders, they will soon need to prove that they are worth their high valuation, in revenue terms.

Every company feels compelled to have a social advertising budget, even though there is scant evidence that these dollars generate any sales, or return on investment. The advertising and social marketing industry will have you believe they are effective sales drivers but the reality is that there are few independent studies or evidence to support this hypothesis. If you think about the number of times you have clicked on a Facebook ad or decided to make a purchase based on seeing someone’s status update (or wall post), you will likely reach the same conclusion. Facebook’s ad revenue actually fell in the first quarter of 2012 from the fourth quarter of 2011.

Here is something to ponder about Facebook’s current IPO valuation. According to Anant Sundaram (of Tuck School of Business at Dartmouth) the average price to earnings ratio for the majority of US companies, over the last one hundred years, has been around 15. Apple is at 15 and Google is apparently a little bit higher. However, Facebook’s price-to-earnings ratio is 100.

He goes on to say that “at current levels, it would take Facebook 100 years to generate enough profits to pay for itself. That number is so high because investors are betting Facebook’s profits are going to explode. Sundaram says, judging from this price these investors seem to believe that the company’s profits will double, and then double again, and then double again — all within the next few years. For that to happen, Facebook will need to attract 10 percent of all advertising dollars spent on the planet “across all media – print, billboards, radio, television, Internet.”  To put this in perspective he adds that “Facebook had just over $3 billion in global ad sales. TV ad sales in the U.S. alone last year were $68 billion.” (NPR: “Is Facebook Worth $100 Billion?”).

Facebook recently tried a new revenue generation experiment in New Zealand by charging people two New Zealand dollars (US$1.53) a post to ensure that their own friends see what they write (Wall Street Journal: “Facebook Gets Religion for Revenue”). Are your status updates and posts on Facebook valuable enough to start paying to share it with your friends? I know mine are not and never will be.

Let’s just say I am holding off buying Facebook shares because I don’t believe they have a real revenue model, yet. That is not say that they will not find a Google like search cash cow but let’s just say ad banners on the site are not the Holy Grail that Mark Zuckerberg wants us to believe.

To LIKE or not to LIKE…

There seems to something akin to a marketing frenzy to build Facebook LIKE’S among companies. Almost every second email I get relates to a contest that is trying to entice me with a $xxx,xxx prize or a dream vacation. However, when I excitedly click on the entry link it frustratingly forces me to LIKE the product in order to enter the contest.

Sure, it will help you drive up the number of Facebook LIKES on your fan page in the short-term but what is the real and long-term value of this? I get that there are many statistics out there about how conversion and engagement is much higher on Twitter and Facebook and social media is all the frenzy in marketing today but for a moment let’s break down the psychology of most of these contests.

I am not saying all contests are the same and therefore not valuable but am merely talking about the recent frenzy where the prizes have no bearing or relevance to the company, or product, and the contest itself does nothing to build customer engagement with the brand. Most importantly when you throw the kitchen sink by emailing people randomly, it becomes akin to a marketing bribe where in order to receive a LIKE; rather than trying to target a relevant audience and do it on the merits of your brand or product story.

The simplest way to think about – imagine walking down the street one day you decide you want to make 100 new friends that evening. You could simply stop every person you see and offer to pay for their dinner at a really fancy restaurant, like Per Se. I have no doubt you would end up with 100 new “friends” very quickly, and without too much effort. Now what are the odds that any one of these 100 people will actually ever have anything to do with you again or be there in a pinch? Versus building real friendships through time, common interests and all the other real and meaningful stuff.

This is what these almost daily contest emails have become for most of these brands. Everyone from airlines to tampon makers have sent me emails, to enter contests, but only after I LIKE them on Facebook. Ninety percent of them have no relevance to me, my purchase history or my interests. It seems all these so called social media agencies are throwing the kitchen sink to drive up campaign success metrics, which frankly are of little value for the brand. Because even if the grand prize for a tampon product was so amazing that I decided to LIKE it to simply be eligible to enter, I am never going to purchase that product of have any future interaction of engagement with the brand.

Social media done right is about building long-term relationships, kind of the way we build friendships in the real world; and it is hard work.

So the next time you want to increase your fan page LIKES on Facebook, remember that 10 truly engaged customers will not only spend much more money on your products, consistently, over the long-term but also are more likely to become evangelists for your brand. Their value alone will be greater than the 1000+ LIKES you may add of people who don’t even know what your company makes.

Groupon: To Deal or Not to Deal?

I struggle to see a viable business model behind this much publicized company that is about to jump on the current tech IPO bandwagon.

I can see some short-term value for membership based business’s like Costco or Zip Car using a 30%-50% discount on the first year membership fee to attract new customers. Businesses like these will make up more than the discount value in subsequent sales, as someone buying the coupon is obviously interested in what they offer. I will also say that there may be some intermittent value for local businesses that are more indulgences than necessities, like a river cruise with dinner that people would not consider spending on without the 50%-70% discount.

BUT for pretty much every other type of local business like restaurants, clothing retailers, supermarkets, etc. I see absolutely no value in offering a 50%+ discount to attract new customers; and more so doing this repeatedly.

Additionally, I have read upwards of 70% of businesses (I know at least two first hand) that have used Groupon, swear they will never use it again. Groupon denies this and does not share any of its figures. Whether Groupon is lying or not (we will not know until after the IPO) there still remain many fundamental flaws with their model:

– There are no barriers to entry into the daily deal market; and the number of competitors is growing with Facebook and Google the latest entrants. Basically, all you need is a sales force

– There is also nothing unique or special about Groupon or its relationships that creates or incentivizes loyalty from its customers

– Groupon terms are also supposedly far from endearing: “Each time Groupon sells a voucher to users, it collects cash up-front. Merchants’ share of the proceeds, which averages about 60% world-wide, is remitted later—sometimes much later. In North America, merchants get paid in installments over 60 days. Internationally, it typically takes 70 days.” Seems Living Social pays within 15 days and Google says they will pay within 4 days. (WSJ: http://on.wsj.com/oO2XdQ).

Beyond these issues I also don’t see why any business would discount their product or service repeatedly because it very quickly devalues their brand and will erode forever any premium people were willing to pay for it.

Finally, I also have serious ethical issues with the company. Aside from how quickly they threw their agency under the bus after the Super Bowl ad debacle, it turns out there has been a lot of insider selling going on. The owners have taken out $870 million so far from the $1 billion they raised. Odd given that the company lost $150 million last quarter and needs lots of cash to compete and stay ahead of its rapidly growing list of competitors. (Read the article @Business Insider)

My take: Groupon is smoke, mirrors and hype. This is why they had no choice but to turn down Google’s $6 billion offer, and also the reason their insiders are cashing out now, ahead of the public scrutiny an IPO will bring.