Off the Reservation

So who at GM was responsible for pulling the company’s advertising money away from Facebook? The Wall Street Journal told me so today. The man was Joel Ewanick, then the company’s global marketing executive. The Journal’s story tells us that Ewanick was fired—evidently for “failing to properly vet the financial details of a European soccer-sponsorship deal.” Did his actions regarding Facebook play a role. Oh, no! Oh, no! Not the least of it. But Ewanick’s talking to the WSJ about that action, before the Facebook IPO was launched “didn’t go over well among the executives in GM’s top ranks,” the Journal tells us. A European soccer-sponsorship deal? Really? Or was the board just digging for something—anything—to rid itself of a man who was “polarizing,” a “glass breaker,” and a “firebrand”?

Nothing wrong with pulling money from an advertiser—but making GM look like a maverick, making it seem disrespectful of the gods of Social-Media, why that will start somebody digging into European soccer sponsorships.

Reminds me of another polarizing firebrand at GM, Ross Perot. He joined the board in 1984 when GM bought Electronic Data Systems and Perot became GM’s largest stockholder. From his board position, Perot had a look-see. Soon he was in the public media criticizing GM’s ways. Board members don’t do that, Ross. Phrases like “nuke the GM system” and “teaching an elephant to tapdance” reverberated in the media—until, in 2007, the board decided to repurchase all of Perot’s stock for $700 million and to send him back into the wilderness where firebrands belong. I got these facts from an old Time Magazine story (here).

Will we learn, in days to come, that GM has once more discovered that a presence on Facebook “has been shown to be helpful to reach a vital audience”? Wouldn’t be surprised. As for Ewanick, I don’t think he will just disappear.

Expanding Canvas, Shrinking Paint

The WSJ yesterday carried a story titled “Social-Media Stock Frenzy Fizzles.” Whatever the content here, I admire that headline. Catchy. Now all this, I think, began when General Motors called its advertising money back from Facebook—in advance, one speculates, of pouring out vast masses of it on NBC’s coverage of the Olympics. Tell you the truth, I’m falling in love with Chevrolet all over again. The Olympic spirit? Oh, it’s Okay. The Chevrolet spirit? Now that’s the shining red pickup I want to drive to heaven.

I got to thinking yesterday, what with that frenzy fizzling. The abstract thought was: If supply expands fueled by frenzy—but demand shrinks because the customer isn’t shopping anyway, no matter what you say, no matter how low interest rates are, no matter how radiant that Shining City in the Cyber Sky, why then there is a mismatch. And even those people dancing the St. Vitus dance will eventually notice. The visual image that came unbidden into my mind is the situation of a painter who discovers that his canvas is expanding as he tries to cover its surface, and the faster he paints, the more his paint-supply diminishes.

We’ve all noticed it, of course. With-it broadcasters have developed a new sign-off line. “See us online anytime. And follow us on Facebook and on Twitter.” Why is that list so short? Wikipedia shows a list of 198 social-media (link)—from “43 Things” to “Zoopa”—and it doesn’t even include Zynga, a “major player” in services and games.

Painting the sky Chevrolet red? GM has no problem doing that—on NBC. Watching sports big time every four years? Yes. Discovering what itsibitsiThunder has to say on Twitter today? That isn’t quite so big a magnet.

11th Commandment

Anxiety and anticipated Schadenfreude†are beginning to erupt. This coming Thursday Facebook will publish its first earnings results since going public. Does Facebook have the moxie to attract the advertising revenues that may in future rival Google’s? Those who hunger and thirst for an uninterrupted population growth in the Olympus of the Cyber Cosmos—especially as Yahoo seems to be ailing—are anxious. Those who delighted in Facebook’s rocky IPO are sharpening their pencils; whatever the results next Thursday, they will find them wanting.

Now, don’t you know it, advertising must be personalized. The ads appearing when You land on Facebook must mean You, You, You. And Facebook, presumably, has all the stuff it needs to personalize the ads. After all, its members reveal such tightly-held secrets as their gender, age, and where they went to school. And then there are those many words they write there that can be individually mined and polished into pointers straight at ads. Am I a little doubtful? Yes. Suppose I shared with Facebook that I spend a minimum three hours a day in giving myself elaborate pedicures. Just suppose that. Now if I really did that, I would have quite an arsenal of nailclippers, creams, and even nail polishes already—not to say tiny little cotton pads to place between my toes to keep them sweating as I labor on their edges or polish, prime, and paint their sufaces. Foot odor would be a no-no, several brands of foot deodorants would stand there waiting to yield creams and sprays. Therefore, arriving at Facebook, all those ads trying to sell me Surecut Serrated Toenail Scissors (which I usually call SSTS here at home) or Sally Hansen Clip n’ Catch—or bottles of her Hard As Nails, of which one is still half full—or Pour Homme Ultra Slim Clipper in Black Leather Pouch (which I bought and only use for clipping the small toe nail on my left foot), why all those ads would mean nothing at all to me. They would be same-old, same-old. Yes, I have my doubts.

But what can a poor industry, entirely dependent on advertising revenue, do? What except to innovate? Yes, to innovate. Thus Facebook has a program of tracking people’s off-Facebook travels on the Internet and examine, using little bots (they work for mere pennies per nanosecond), the key words found on those sites so that, when people return to Facebook again, new ads, based on this on-the-hoof research can be presented to the owner. I went to check out how the Roman poet Virgil’s name is spelled. In the future, once that innovation is in place, I’ll see on Facebook is an ad offering me Virgil’s Aeneid. But I already own three different editions.

So what else can the poor industry do? They can drive me, lash me, seduce me, prod me to do even more self-entertainment. Only when I do that can they present me with their ads and if the minor gods of statistics so will it, I will actually click through. It should be a commandment, the 11th Commandment. Thou Shalt Engage in Entertainment. Failing which, the Cyber Heaven will cloud over and the radiance of the gods up there will dim.

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†The German word means joy over others’ misfortunes, literally “damage-joy.”

Growing Pains

Here is a quote which illustrates the capitalist mentality. It is, to be sure, by a journalist for CNet, Roger Cheng, who is presumably not a capitalist himself (else he would be wheelin-n-dealin rather than surfin-n-writin). But Mr. Cheng probably has his fingers on the pulse. The quote comes from an article reviewing Facebook’s lackluster performance yesterday (link) and ends by saying:

But with its business model still in flux and CEO Mark Zuckerberg's promise that the user will come first, perhaps it's a better bet to stay on the sidelines for now.

Zuckerberg’s grave sin, putting the users first, comes from his remark the morning FB went public when he said: “Our mission isn’t to be a public company. Our mission is to make the world more open and connected.” Zuckerberg is still young, isn’t he. He hasn’t drunk deep enough at the fountain of real wealth. The mission, Mark, is to make the stockholders happy. The public is just a means to that end. Write that down with a good ballpoint pen—right on your palm. 

“Valuation”

With Facebook going public today—and leading up to it, presumably in the wake of it too—the business pages are littered by the word “valuation.” Thus Facebook’s valuation today, still about an hour to go before the heavens open, is $104 billion. So what is valuation, exactly?

The full and correct use of that word, or so the Investopedia tells me, is “pre-money valuation.” I am told that real insiders use the first and newspapers the second part of that phrase. Pre-money here actually means the worth of a company before any real money has been forked over for its stock. The stock value of a company, then, is presumably called “post-money valuation”—but that’s just the ordinary stock price.

“Valuation,” therefore, means nothing more than “expectation.” It is a guess by some mysterious and presumably continuously changing band of investors—a guess they more or less all agree upon—of what the stock will, shall, in the future, actually fetch when that Initial Public Offering, the IPO, the capitalist version of the Holy Ghost’s descent, actually takes place.

The Wall Street Journal helpfully informs me that there are, right now, Facebook not counted, its glory is just, ah, 40 minutes away as I type this, twenty some-odd Internet enterprises, most without any revenue, never mind profit, that are “valued” at $1 billion or more. They offer such irresistible new services as keeping your scrapbook, making notes, sharing files, and renting rooms—services we desperately need to see online. The difficult we do today, the impossible, e.g. online toe-nail clipping, will take a little longer.

When in Doubt, Cash Out

The Wall Street Journal reports this morning that 57 percent of stock Facebook will sell in its initial public offering will come from investors, 43 percent from the company’s own printing presses, as it were. When Google went public, 28 percent came from investors. I found this interesting. Right now the stock’s value is riding on the magic carpet of expectations. Once the company is public, the price will be determined by Facebook’s ability to draw in advertising revenues. A story in the New York Times this morning suggests that beyond GM’s withdrawal of its ad spending from Facebook, others are contemplating doing the same—and that the banks backing Facebook have similar concerns. Somebody is certainly cashing out—six of ten of the owners…

GM Face-Off

Genuinely interesting business stories are so rare. The Dow is off because the Greeks don’t want to play? Again? How many more times? An investment bank is rocked by losses? Again? The stock of a company leaps on news that it will have massive layoffs? Yawn.

The news today that GM will no longer advertise on Facebook, having, as it were, tested the waters by spending $10 million—why that is something worth contemplation. Have I said it before? Probably. Certainly on the old LaMarotte. I’ve felt, ever since my own days in advertising, which now seems pre-historic, that justifying ad expenditures by results may not be possible, with any precision, unless you’re advertising in the Wanted sections of papers. Well, GM has found the way to do so, and evidently FB does not deliver.

Our latest “industries” consist largely of banks of computers and software connected to the Internet: Facebook, Twitter, LinkedIn, and their imitators. They depend on building up massive bases of names and e-mail addresses—“monetizing” which to channel advertising messages is where the “industry” actually is.

Assemble a huge crowd in an abandoned drive-in movie theater and then show them masses of ads on a huge screen. Is that the model? No. Not really. Assemble a huge crowd in an abandoned drive-in movie theater and then show them a tense thriller on the huge screen. But scatter postage-stamp-sized little ads on the grounds so that the few who have to go to the toilet in the dark might see them, bend down, and pick them up. That’s the model at work on the social media.

A question today sent me to FB; I am one of the millions Facebook counts as its monetizable base, but I visit the site only rarely. Okay, I am a minority perhaps. Still, I did my business there. It’s content is immensely rich, complex, all those people who are my friends, all the stuff they say, the links they provide, the pictures. Did I even notice the ads on the right? No. Did I look there? No. I’ve learned to ignore the right column precisely because I know that it holds ads. Can’t do that when watching TV. That’s where the mute button comes into play.

Instapost

I own neither an iPod nor an Android—but I have a couple of little handheld cameras and the Picasa software on my PC. Impossession (to coin a word) of these newest devices made it impossible for me to test the great innovation that has catapulted Instagram in two years from a raw startup without money to a $1 billion corporation which will be soon be the property of Facebook. The hoopla made me curious. What innovation has caused this astonishing growth? Was it the company’s ability to hold down total employment to 13? Thirteen is a good number!

The simple answer is that social media represents our only evidently growing industry, and the founders of Instagram, Kevin Systrom and Mike Krieger (based on photos they’re in their twenties) wrote software for the little hand-held devices capable of editing photos, on the phones themselves, and publishing them on social networks, not least Instagram’s own. The technology consists of sixteen filters that manipulate a snapshot. The filters have fetching names like Amaro, Hudson, Xpro-II, Inkwell (for black-and-white), Hefe, Nashville, and 1977 along with others. That last one, presumably, to make pictures look antique. The innovation here lies in automating the editing function. You can have any look, dear users, so long as it’s one of those sixteen.

Making their storage systems work rapidly—and creating a system that will scale massively and rapidly—shows me that Systrom and Krieger know their stuff.  They’re using very sophisticated database management techniques that probably took much longer to learn than pixel manipulation. It isn’t innovative because the techniques they deploy were pioneered by Google quite some time ago.

Reasonable photo editors perform  the functions of those filters well—albeit it takes more time and thought. Picasa’s software is among them—also free. To give some sense of what I’m talking about, here is a before-and-after of an old winter outdoor shot of mine.

Now the original is nice enough—but if you want to make it look more edgy, contradictory—thus as if night were just around the corner, the modified image is a “filtered” version.

The miracle of economic growth that Instagram represents appears, therefore, to rest entirely on the miniaturization of computers and the irresistible attraction advertisers feel when viewing large numbers of people at play. 

Social Networks

What do Lady Gaga (10,999,135), Justin Bieber (10,436,368), Barack Obama (8,687,105), Britney Spears (8,234,189), and Kim Kardashian (7,915,103) have in common? Big numbers, for one thing. The numbers I reproduce are the followers they have on Twitter according to twittercounter.com (here). They are, in the order shown, the five most popular tweeters in the world.

Barack Obama stands out in two ways. He is not an entertainer, and he is the only person in the list who is over 31 years of age. For those fading few like me who did not recognize but perhaps two names on the list, Lady Gaga is Stefani Germanatta, a pop singer, aged 25; Justin Bieber is a 17-year-old Canadian singer; Britney Spear, 30, is a recording artist and entertainer, and Kim Kardashian, 31, is described by Wikipedia as a “personality” and a “socialite.”

The times are changing. What we are pleased to call “communications” is morphing into something very strange, never before seen—but, I hasten to add, so were newspapers when they first appeared in the wake of mechanized printing in the seventeenth century. Indeed, the social networks, which are now coming to dominance, are the consequence of electronic communications media. Growth rates are astonishing. Here is a graphic, built from data on this Facebook site, of three of them:

The big name (for now) is Facebook. The hot new property is Twitter. It more than doubled between last year and this. Twitter had 100 members (that’s one hundred, not a typo) in March 2006. LinkedIn, a business net-working site, has recently gone public and is now, suddenly, cluttering up my e-mail inbox.

It’s well to remember that “networking” actually pre-dates the Internet. The concept surfaced in the 1960s and was well established as a concept, indeed even as a quasi-institutional phenomenon, by the 1970s—long before the Internet was commercialized in 1995. You got ahead, it was said, by cultivating a network of well-placed acquaintances—courting them, as it were, consciously, with your own career in mind. I clearly remember once attending a seminar during the 1973-1975 recession; I was looking for consulting clients at the time, a tough time economically; the seminar much disappointed me. It had been too cleverly named. Everybody at the meeting was also looking for clients too— and not a client in sight! LinkedIn, not surprisingly, was the first of these social networks, established in December of 2002. Facebook began in February 2004, and Twitter appeared officially in July of 2006.

The growth in networks is matched by explosive growth in mobile devices. In the third quarter of 2010 alone, 417 million mobile phones were sold worldwide. And in that same time period, another 80.5 million smartphones were purchased. I have this from Marketsize entries reachable here. Instant availability of linkage to a global com-system, with or without wire, is matched by services that link people to each other—and to the personalities they wish to know all about, up to the minute, as it were.

Over against this we have a decline in the by now “traditional” newspaper establishment. In 2010 the top 100 newspapers in the United States had a daily circulation of a mere 21.9 million. Per Reuters, 379 papers had a daily circulation of 30.4 million in 2009, having declined 4.6 percent from 2008. As circulation drops and newspapers first thin out and then disappear, our carbon footprint is also presumably shrinking. Or so it would seem on the surface. The truth is that we can’t know for sure. Is the energy we save by producing less newsprint now consumed in making millions of electronic devices so that our population can keep in touch with events, like Now, like in Real Time, while On the Go?