Facebook Chemistry

If you have ever maintained a swimming pool you’ll know pool water chemistry is very much a balancing act. Companies who offer free products and services, such as Facebook and Google, have a similar balance to maintain between their customers and their members (or users). Favorable adjustments on one side of the relationship can have negative impacts on the other. Finding the right balance is paramount to establishing the correct environment (for engagement and activity in Facebook’s case) and yielding returns.

A symbiotic relationship forms in these business models – the customers pay the bills providing users with free access to the products and services. In other words without customers there are no users and without users there are no customers. Simple?

Short-term gains or long-term vision
The management of this symbiotic relationship is a skill often overlooked or misjudged. It is a skill which I’m willing to bet consumes a large proportion of management time in companies employing this model. It is a skill that when developed, becomes a significant strength to the organization. The environment or model forces the hand, and the skill allows these companies to address issues and complex problems. The net result – balanced chemistry. Facebook has made mistakes, some arguably as recently as this week such as the email switcheroo, however overall the company has proven themselves here where many companies fail.

Upsetting the balance is easy and can be done in seconds, for example:

Customer: “What we really want is more impactful ads.”
Sales rep: “OK, how about an ad which takes over the screen for 15 seconds.”

And so the infamous interstitial ad is born – loved by marketers and the sales team who sells them, hated by users (interesting post by Michael Arrington). In fact we heard a similar case earlier this year as General Motors famously announced, just days before the IPO, that it would no longer advertise on Facebook. Turning down a million dollar customer is not a decision made lightly. These decisions undoubtedly come from the top and sacrifice short-term gains for long-term vision.

Chemical balance
When a balanced solution is achieved both constituents win. You may remember at some point last year Facebook introduced narrative text in user profiles. Something along the lines of,

“I work at __________, and went to school at _________. I was born on, ____________ and live in __________ , __________.”

To the user this is a no-brainer for update, it’s useful information to share and requested in a non-intrusive way. To the customer, its valuable demographic information which no doubt sizably improved Facebook’s targeting segments. A perfect balance – customers are able to target more users, while the user experience is improved through better targeted services and ads while not being interrupted with 5 new fields added into the registration process for example.

Applying the chemistry to mobile
It’s been well documented Facebook needs a solution to monetize mobile – they cited it themselves in their SEC filing. We should congratulate Facebook and honor their skill in ‘maintaining the balance’ to this point as the very reason you do not see banner ads in their mobile app.

As a leading player in the web, Facebook is at the bleeding edge of technology and user experience. With over 900m active users (as of March 2012) Facebook has significant influence – meaning when Facebook makes a move many other web properties and sites follow. We have seen this as news feeds, messaging, navigation, simplified registration, like / vote up, buttons and styles etc. all take steps towards becoming standards.

The advertising industry has established standards – from billboards to newspapers and magazines, to websites and now mobile (both governed by the IAB). The agencies have great fun and deliver some wonderfully creative campaigns within these guidelines – note the McDonalds sundial billboard below which points out the appropriate sandwich based on the time of day… The difference here is that Facebook is rejecting these advertising standards as they don’t take into account the symbiotic relationship – they upset the chemistry and therefore threaten the business model.

Facebook never bought into the traditional banner advertising units for the desktop UI. In 2006, Zuckerberg famously turned down $1m from Sprites ad agency to make the entire homepage green for one day. In addition when ironing out the Microsoft deal to use its ad sales network to represent Facebook’s ad inventory; according to one Microsoft negotiator,

“Mark was adamant about preserving the user experience and the layout. It drove our ad people crazy because it made it very hard to deliver standard Internet ad units.”

The BBC News iPhone App (shown above right) is a great example where the user experience is distracted by a banner ad running across the screen – worse still the advertisement is untargeted adding little-to-no value.

The fact Facebook makes these decisions every day, positions it well to deliver a solution to monetize mobile in a balanced and non-intrusive way. They have the ‘skill’, the resources, the experience, the motive and the influence to find and establish alternatives. What they need is to find the balance – ongoing success depends on it.

Image credits: Facebook office: flickr/pshab. McDonalds billboard: dsgnwrld. IAB display unit sizes: Wikipedia.

Google+ Hits The Social Sweet Spot

Google+ lit up last week as comments and jokes bounced back and forth regarding the new user interface and the ‘mysterious’ white space to the right of the screen.

Perhaps more poignant in the battle for most Monthly Active Users (MAU) – a key measure of engagement used by social networks – is how Google positioned its social offering. Often tagged as ‘late-to-market’ Google+ has received both positive and negative reviews. Few, if any however, have taken into account Google’s positioning in the heavily desirable and untapped white space that exists between Social networks and Communities. It is this positioning along with the insatiable interest in all things social, which might just provide the key Google needs to unlock the powerful network effects of Facebook.

To explain this better, take a pen and draw a line on a piece of paper. Label one end, ‘Social network’ and the other ‘Community.’ Now start listing various social networks and communities next to the corresponding label. If we’re on the same page you should end up with something like this:

Social Networks are fundamentally different from Communities

Grouping these sites based on their core allows us to quickly visualize and separate the two models. The primary difference is best described as the glue that holds them together.

In a social network for example – a past, present or future relationship is what connects the members. In a community it’s a shared interest that brings people together. Think of a tennis club as an example of an offline community.

Today, with social media being one giant melting pot term, the two models are commonly interchanged and the fact that they are two models (and very different ones at that) is often lost or overlooked.

The large social networks and communities we use today are at the extreme ends of the scale creating an untapped space in the middle – essentially a foothold in both camps. These sites continue to invest considerable time and resources to nudge themselves more towards the center of the line suggesting a level of desirability held by the space – however given the difference in the models expecting this to happen overnight is akin to stopping an oil tanker on a dime.

While it is true that community can form within a social network and visa versa it’s very difficult for a social network to force or facilitate community and for a community to force or facilitate a social network. The reasons for this are based on both internal and external factors. Externally, the primary reason people join each are different, and internally the skills required to be successful are different. For example, community development is often counter-intuitive or at odds with the social networking business model. This could explain why Google allowed YouTube to be a standalone business and Mark Zuckerburg announced last week on his newsfeed, “We’re committed to building and growing Instagram independently.”

To date neither LinkedIn nor Facebook has seen runaway success in their community building efforts:

  • LinkedIn Groups are an attempt to build community however they continue to lack any community feel
  • Facebook Subscribe allows users to ‘follow’ another user based on an interest however they may have no relationship with.
  • Facebook Groups for Schools launched this month attempt to generate community within Facebook’s social network. To soon to tell but definitely worth watching.

Think of social network operators as brokers

The reason for the investment can be found in the words used by the fictional detective Lieutenant Columbo as he looks to solve a homicide, “follow the money.”

Social networks are interested in community as community tends to generate significant amounts of content (All Things Digital reported Instagram users upload more than 5 million photos a day and generate 81 comments per second, as of today the niche programming community site stackoverflow.com has generated 2,947,135 questions or almost 10m pieces of content based on an average of 2.35 answers per question.) As the age old adage goes, ‘content is king.’

The reason content is king is because when combined with demographic and behavioral information it provides unmatched opportunities for targeting based on a users digital body language. Social network and community operators are essentially the brokers between advertisers and consumers. It is at the point these two parties meet that revenue opportunities exist. It is no surprise therefore that the 2 of the largest players in social networking – Google and Facebook obtain the majority of their revenues from advertising and arguably you could include LinkedIn as it obtains 30% from advertising and 45% from recruiting tools – which is essentially doing the same thing – matching users with interested parties (recruiters as opposed to marketers).

Given social networks need communities for continued growth, adoption and engagement they essentially have 3 options to obtain them. We’ve seen all of these in action:

  1. Build – Google+, Facebook Groups for Schools, LinkedIn Groups
  2. Buy – Facebook and Instagram, Google and YouTube
  3. Partner – LinkedIn and Twitter.

Building takes time, buying requires care and diligence not to upset the foundation of community (see Instagram backlash) and partnering has its own risks given the intense competition in the space. Motorola employees may think back to the partnership with Apple after which Apple entered the phone business and almost destroyed Motorola’s handset division.

Google+ a foot in both camps

Google+ is interesting because in being late to the game, Google had the opportunity to assess the market and position itself in the center. Given both LinkedIn and Facebook have been heading in this direction – could this be the sweet spot for social?

Google+ blends both community and social networking together. As a member you can participate based on interest, a relationship or both. This capability is build from the ground up and is the very fabric of the experience – it is a first and certainly not an after thought requiring a re-architecture akin to changing the engine while traveling at 100mph. The intuitive ‘circles’ enables users to manage the relationships and control their overall experience.

Whilst this social sweet spot or ‘networked community’ for want of a better term is unchartered waters, it does provide a myriad of new opportunities and benefits to Google. Combine these with Google’s other well-adopted product lines such as Search, Gmail not forgetting the YouTube community and the possibilities begin to multiply.

As users look for consolidation of their social presence in addition to increased value/return, and advertisers look to increasingly segment and target the pro-sumers, Google+ becomes a very attractive offering.

Will focusing on the upcoming IPO distract Facebook? Will Facebook be able to address concerns regarding the large numbers of its user base switching to a yet to be monetized mobile experience? Will Google and Facebook be able to walk the line between keeping their member base happy and offering value/return to marketers? Will Google be able to exploit its positioning of Google+ as a ‘networked community’ and clarify their offering as a new social experience? Will Google be able to leverage the developer community to bolster its offering? Will Google win over businesses and consumers to help drive a potential network shift? Will Facebook double down and wow us with something insainly brilliant? Will Google’s diversified product portfolio provide the leverage it needs to break the intensely strong network effects of Facebook?

As these two titans battle out for most active users, perhaps LinkedIn will consider bolstering its community offerings with potential acquisition targets such as focus.com or Quora? We’ll find out the answers to these questions in the coming months – it’s going to be an interesting couple of years ahead.

This article was originally published exclusively on socialmediatoday.com and gained ~300 shares in the first 48 hours helping it become the top post on the site that week.