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.

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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.

Netflix, Data, Drunkard’s and Adam Sandler

There has been much discussion about Netflix’ recent announcement signing Adam Sandler for an exclusive four movie deal to be premiered on Netflix. It has also generated talk of the beginning of the end of the traditional Hollywood studio model as well as praise for Netflix use of data to make a content investment decision; albeit, this particular decision has left many people scratching their heads.

Let’s start with the fact that it has been a while since Mr. Sandler made a commercially successful or comedically substantive film; while Grown Ups fared better, he did not carry that movie. If you ask people to name their favourite Adam Sandler movie, most say Wedding Singer and movie buffs will add Punch-Drunk Love. His last few films, ‘That’s My Boy’ and ‘Blended’ have been critically panned and box office duds. In fact, the last movie, Blended, might have had a longer advertising campaign preceding the release, than the actual run it had in theaters!

On the lack of critical and commercial success, Netflix’s content chief has a data counterpoint: “Very uniquely, he stands out for his global appeal to Netflix subscribers. Even movies that were soft in the U.S. [theatrically] outperformed dramatically on Netflix in the U.S. and around the world.” (Source: Hollywood Reporter).

Don’t get me wrong, I love data and am a big advocate for using it to make better and more informed business decisions. However, I am also against over-reliance on data and using it without the benefit of judgement to accompany the decision-making process. My thinking is best explained by David Ogilvy who once exclaimed about the ad industry’s over-reliance on research – “I notice increasing reluctance on the part of marketing executives to use judgment; they are coming to rely too much on research, and they use it as a drunkard uses a lamp post for support, rather than for illumination.”

If one were to take a closer look at Netflix catalogue you will find that of the twelve highest rated comedy films, currently available in USA (as of October 2014); 2 are foreign (The Intoucahbles and Zindagi Na Milegi Dobara), 8 were made between 1953 and 1987 (Breakfast at Tiffany’s, Roman Holiday, Sabrina, The Graduate, Charade, White Christmas, MASH and Good Morning Vietnam), only 2 are from this century – Pirates of the Caribbean (2003) and Silver Linings Playbook (2012).

Additionally, their top comedy recommendations for me include ‘Maz Jobrani: I come in Peace’, ‘Tortilla Soup’ and ‘Welcome to Dongmakgol’; each movie gets 4.5 / 5; stars as personalised recommendations for me. No doubt you are also scratching your head and asking “Max who?” and what the %$%^*$%* a Dongmakgol and can it be eaten?

Then there is also the fact that Netflix continues to have a large selection of Mr. Sandler’s movies in both the US and abroad; “We had almost all of Adam’s movies in the first pay window in the U.S. Today, we continue to have those movies in the first pay window in Canada. And then, through various windows that follow the pay window all the way to the deep catalog, we’ve licensed Adam’s movies in all of our territories.” (Source: Hollywood Reporter). Considering these two data points one could surmise that Netflix has a pretty poor selection of comedy films in their library but a wide selection of Mr. Sandler’s movies.

If you are like most people, who sign-up for a monthly subscription service, you only feel you are getting value for your money if you are able to watch movies frequently. You start by looking for recent comedy films, finding none you tend to default to one with a recognisable actor. On both these counts your Netflix search will deliver an abundance of Mr. Sandler’s titles because of the limitation of their current comedy catalogue. I have no doubt that their viewing data is accurate, and many subscribers are watching Mr. Sandler’s films, even repeatedly; but if I were to add a dose of judgement I would also guess that this is has less to do with his popularity or the quality of the films, and all to do with the fact that there is really nothing else worthwhile to watch…

Then there was also the bizarre press release issued by Mr. Sandler saying he signed this deal because “Netflix rhymed with wet chicks.” Hopefully, this is not an early indication of the substance of each of the $40 million a film that Netflix is reportedly paying him. (Source: Reuters).

While I laud Netflix use of data (House of Cards is a brilliant case in point) and for continually breaking ground in entertainment and forcing studios and TV networks to think in a more customer-centric manner; I am not sure I agree with their choice of Mr. Sandler. I wonder if this is an instance of using data for illumination, rather than support; but either way it will be interesting to see who has the last laugh.

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.

Big Numbers. Small Research.

Many companies fall for the big numbers being touted about the size of the Indian middle class, the fact that it is the second most populous nation on earth and has had the second largest economic growth rate for most of the last decade. These figures can and have dazzled even the most seasoned marketers, and here begins the fallacy of easy growth and big revenues. For years the middle class number being thrown around was 300 million, by both the UN and the US President. In 2001 it was finally accepted as being total tosh after a comprehensive McKinsey Global Institute Study. But it did not matter because the allure was enough for many brands to pour money into India without ever questioning the numbers, and far more importantly without trying to understand the local market dynamics and unique consumer behaviour.

Today, it is accepted that India’s middle class will grow to be an astounding 583 million people by 2025 (source: McKinsey Global Institute). To give you an idea, five percent share for a company like Kellogg’s would equal 29.5 million customers. In the UK, Kellogg’s is the market leader with a commanding forty-two percent share of the cereal market, which amounts to a mere 27 million customers in comparison. So, essentially even a relatively small share number, that in any other market would be scoffed upon, in India can amount to a larger customer base than leadership share in most developed markets. Many a seasoned marketer has looked at these numbers and dangerously never bothered to scratch beneath the surface before diving headfirst into India.

In the 1990’s Kellogg’s was one of the many companies that fell victim to this and had to learn their lesson the hard way. They invested some $65 million into launching their No. 1 breakfast cereal brand, Corn Flakes, in India; relying entirely on the population numbers and dreams of converting a meager one or two percent of consumers, without bothering to study and understand the existing breakfast habits that have been around for thousands of years.

If anyone at Kellogg’s had simply bothered to ask any Indian they would have known that Indian’s like to eat hot and savory foods for breakfast; like idli & sambar, aloo paratha with pickle, or spicy mixes like bhujjia. Furthermore, Kellogg’s never bothered to change any aspect of its marketing strategy or packaging for this vastly different customer. Instead, they relied on their Western strategy to win the day. Employing their world famous marketing strategy of “crispy flakes and premium quality” – unfortunately for them it turned soggy the moment it landed in hot Indian milk on every breakfast table. Their price premium also made them an unaffordable luxury for the vast majority. Kellogg’s was so confident of replicating their global successes that they proceeded to immediately launch a whole series of brands, one after the other; in the end only compounding woes.

In 2001, Kellogg’s finally realised their combination of ignorance and arrogance had led to dismal failure in India. They realised that they were not going to change the Indian consumers’ age old eating habits, in one short decade, and that they needed to change their strategy to succeed in India.

Kellogg’s is by no means alone; Mercedes Benz, Coca-Cola, MTV, Domino’s Pizza and a host of other well-established global brands and savvy marketing companies all learned their India lessons the hard way – by basing their entry on flawed assumptions, doing scant local research or arrogantly expecting to replicate Western strategies, they too failed to set themselves up for success as early entrants. Yet there is an equally long list of hugely successful companies that took the time to understand the market, adapt and cater their product offerings to suit the Indian palate and local tastes; they are now laughing all the way to their Indian bank accounts!

(Sources: Brand Failures – and lessons learned! and Brandalyzer)