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.

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?

@Zappos Customer Mantra

Treat your customers well and they will come back; treat them like they are really special and they will not only come back more often but also spend more money. Sounds really simple when you say it but much harder to effect when it means making sure that your customer experience is consistent across all your touch-points.

Zappos the online shoe retailer (now owned by Amazon) has embraced and cultivated this customer-centric culture as an organizational philosophy. They ensure that they live up to this expectation of customer happiness in every aspect of their business; even down to making sure they hire people with a certain disposition and a passion for service. Tony Hsieh, CEO, once said “We want people who are passionate about what Zappos is about–service. I don’t care if they’re passionate about shoes.”

Here is an example (and great story) from Zappos.com. A customer checked into a hotel in Las Vegas and forgot to pack her shoes that she bought on Zappos for the trip. She called to order another pair and have them shipped to her overnight. Unfortunately, they were out of stock – most companies would have very politely said they would inform her the moment the shoe became available – Zappos did not. Instead they had an employee go out and find the shoe at a local mall and then delivered it to her hotel; all free of charge!

This is an example of above-and-beyond but the benefits of such GREAT customer service can be huge to a company’s bottom-line. Let’s look at the economics of this act by Zappos. It probably cost them a couple of hundred dollars for the shoes and cab fare. But the value of this seemingly extraordinary act for the customer will no doubt be priceless. I would wager it made her a loyal customer for life, and will probably end up increasing the amount of money she spends at Zappos because she will come back to shop there more often than she would have otherwise. Additionally, how many people do you think she told about her amazing experience; probably everyone she knows – driving countless new customers to Zappos.com – now the couple of hundred dollars suddenly don’t seem so much. Delighted customers are always the most powerful sales tool for a company.

The numbers support this customer-focused strategy. On any given day, 75% of purchases, on Zappos.com, are from returning customers. Repeat customers order more than 2.5 times per year and have a higher average order size vs. first-time customers (source: Luxury Daily, July 2011).

One last statistic I want to leave you with: on average, it costs 10x more to acquire a new customer than to keep an existing one.

#Netflix and the New Red…

Yesterday customers received an email from Netflix, and in one fell swoop this much loved company, one that was a darling of its customers, had put that strong equity on the line. It is ironic that they were thanking customers for their business, in this email, even as they were clearly holding a gun to their heads with another price hike.

Netflix succeeded in pummeling Blockbuster by re-inventing the movie rental category with an innovative business model, high customer satisfaction and a low cost service that was based on giving customers flexibility and not forcing them to adhere to policies designed to make the company lots of money.

I understand that Netflix’s runaway success propelled then into a space filled with deep pocketed competitors in the form of cable providers, telecoms, Google, Apple, Amazon, movie studios, TV networks and a slew of other companies all vying for a  piece of the pie.  I also realize that the company desperately needs cash to pay for the rising cost of content, and has to lower its costs (example postage) to survive and compete.

Steve Swasey, VP Corporate Communications said today, to MSNBC:

“We anticipated some folks were not going be happy with the change. It didn’t surprise us. 30,000 or so is a sub set of 23 million subscribers. They’re not speaking for the majority. We would like those members to stay with Netflix, but the reality is people will leave. We’ll make it up over time and the service will continue to grow. I don’t want to sugarcoat this. We do expect a certain amount of people to leave the service. Besides, Netflix members already go to Redbox, order cable, go to theater and Amazon.”

Barely a few months ago Netflix changed its plans raising their prices and forcing everyone to add a streaming option. So it seemed like they were gently moving their customer base into a streaming only world; gently being the keyword because new releases are currently not available for streaming and will not be for the foreseeable future and the streaming quality is still mediocre, at best.

Netflix has a customer base that is has been the envy of every company; staunchly loyal and fiercely evangelist; and many would have followed the company to the ends of the rental earth. But large numbers are now seeing a very different kind of red. And somehow I don’t think Mr. Swasey’s words are going to placate them.

This customer outrage is picking up steam. It remains to be seen how many of their        23 million customers will cancel their subscription, rather than pay the 60% increase being demanded, and how many will stay to help Netflix truly stay out of the red…

@AmericanExpress – Innovate or Die…not Quite!

Many companies feel overwhelmed by the need to constantly innovate, in an age where the next new and improved, ground breaking or revolutionary product seems to have become the norm. True innovation requires thinking out-of-the-box, taking risks and not being afraid to fail, often.

However, there are two things I tell clients; first, that the word innovation has taken on numerous dimensions that maybe did not fully exist prior to this digital age. A company can be considered innovative if it manages to find a new revenue stream or new use for an existing product; it does not have to come up with a “new” product or service each time.

Secondly, truly innovative companies are one’s who constantly watch cultural trends and adapt and evolve their existing strategies, products and services to take advantage of them. A great example is America Express. Rather than fall into the trap of launching new or improved products all the time, they re-shape their existing ones to keep pace with changing behavior.

Amex recently re-branded their long running Membership Rewards Program as the New Social Currency; tapping directly into the growing global social commerce trend. While it is a masterstroke, companies too often fail to follow-thru on brilliant ideas like this – which means that in the end many such initiatives resemble hollow, smoke filled efforts that simply re-brand with no real substance behind it.

Not Amex; which is what makes them such a formidable and admired brand. On the heels of this re-branding (of their rewards program) they made three announcements that provide the substance and follow through needed to make it real to their customers:

  1. Use your Amex Rewards to pay for purchases on Amazon
  2. Foursquare check-in’s now provide access to special discounts and Amex rewards, at certain retail locations
  3. Yesterday, they announced that their OPEN small business card members can use rewards points to buy and pay for ads on Facebook

Innovation – absolutely! In one fell swoop not only did they re-energize their rewards program by making it more valuable for existing card members, but also tapped into the heart of a younger generation, filled with future card members.