June 13, 2016
Microsoft announced the intent to buy LinkedIn for $196 per share today or more than $26 billion. It’s a huge deal and a great payday for the social networking company specializing in making it easier for business people to connect. But why do this deal and why now? This calls for a lot of speculation but perhaps we can make some sense of it.
Like other major software companies including Oracle and Salesforce, Microsoft sees itself as an essential platform for enterprises at all levels. The more functionality it can provide to its users, the easier it will be to keep them at home rather than roaming the Internet looking for something new. In addition, the availability of a familiar face such as LinkedIn has great appeal for many customers.
But also, we may be witnessing the consolidation of the social networking space. Brands like LinkedIn, Twitter, and Facebook, and others such as Plaxo and MySpace, all got started around the same time—about ten years ago. Since then each has found a niche and many rely on an advertising model for revenue and growth.
Those models are limited by network constraints, however. Each might be flexible and have great people working there but as Metcalf’s Law stipulates, the value of a network is directly proportional to the number of nodes on it. In our case nodes can be thought of as people and while we might all have Twitter and Facebook accounts, the number that also have a third network is smaller for the simple reason we can only track so much.
So the advertising potential of networks is similarly limited. There is a large revenue pie for ads on social networks but it isn’t infinite and as is often the case, the early participants like Google continue to capture the lion’s share of revenues. In such a situation, if LinkedIn can be relieved from the need to generate so much ad revenue growth by simply becoming a valuable addition to the overall Microsoft value proposition, so much the better. The situation is similar with other vendors that offer social and collaboration functions as part of their value propositions, like Salesforce and Oracle.
All this is to say that the age of social media is likely entering a mature phase. We can see which ones will be able to have a stand-alone future and which ones won’t. This doesn’t mean social networks and social media are becoming passé—just the opposite. They’ve become so valuable that they are becoming commodities and it’s hard for commodities to reap soaring profit growth (that’s why they’re commodities).
So, good for Microsoft and LinkedIn, I think they are better together and their association seems to signal an inflection point in social networking. The strike price of $196 per share is significantly below last year’s peak of nearly $260 but also significantly above Friday’s close of $131.08, just about right in the middle. Is everybody happy?
It’s (mostly) Rock ‘n’ Roll
Then there is this from Weekly Standard writer Matt Labash who writes a long rant on Twitter and why it is eating our brains. Didn’t they say things like that about Rock ‘n’ Roll? Obviously, they were right. Matt seems like a man off his meds but like many such savants he can make some interesting points sometimes.
Labash’s target is Twitter, and he points out, “Even after seven years of nonstop media hype, only 16 percent of Internet users tweet, the same as the percentage of 14-49-year-olds who have genital herpes. The difference being that the latter are not proud of their affliction, while the former never shut up about theirs.”
I suspect the herpes numbers are kept down by increased condom use, but what about Twitter?
Ok, seriously, I get it. Twitter. One hundred forty chars. Bad.
Maybe I don’t though.
You may have noticed that about the only things I Tweet are blogs like this or pieces from the New York Times. I don’t read my tweets unless they are delivered by email and I hardly follow anyone. When I go to shows they supply me and my buds with tables, WiFi and power in the hopes that we’ll live tweet the event. I write articles and check email. Ever read the tweet stream from a show when the twits reach critical mass?
“Look at Marc’s sox!”
“Stripes gonna be big!”
“Talkin’ ‘bout Marketing Cloud”
“Marketing next big idea”
“You going to the dinner?”
Yadda.
It’s not for any political reasons that I am Twitter agnostic, I am just an introvert. I can go for days hardly interacting with humanity, truth be told. My wife hates it but I think it’s normal and no, I am not shy. When I have something to say, I… you know…say it. There’s a lot happening in my head and I don’t usually have time to check out just to check in. It’s more interesting in there. I suspect most writers are like that, which might explain Labash’s incredulity about Twitter.
But introverts make up only about 25 percent of the population according to Susan Cain, author of “Quiet, The Power of Introverts in a World That Can’t Stop Talking”. Perhaps the paperback might modify the title to include those who can’t stop Tweeting.
Regardless of my habits, I think I get Twitter. It’s a communication mode that unfortunately enables people with a need to know, to inquire as often as they like from the whole world about their status in it. Twitter and some other social media have vast power to amplify our thoughts as well as our insecurities. But look, only 16 percent, according to Labash, are that insecure. And if insecurity is a form of neurosis then we haven’t made much progress since Freud and Jung but neither have we backtracked a lot.
I am developing an appreciation of the Occupy Wall Street movement that surprises me. You know the news about it and how, over the weekend the movement went global. You probably also know that the authorities are not dealing effectively with it. They’ve been content to watch and wait hoping that the movement will exhaust itself. That’s a good strategy for the last millennium and the movement may wear out if only because as winter approaches it gets harder to remain committed to living on the street. But I wouldn’t bet on it.
That end game is not assured and my interest is in the day-to-day workings of the movement. There is no leader and as yet no demands which is part of the brilliance of everything that has transpired. Let me tell you why I think so.
Demands would require a leader, someone to give a face and a name to the demands. Without formal demands we are left to presume from the actions of the loose group that it is protesting the situation that drove the economic crisis in 2008 which has not been resolved to anyone’s satisfaction and which is responsible for the dismal economic outlook — especially for people in their 20’s looking for their first real jobs.
So there’s neither message nor demands but with a nod and a wink we all know what’s unspoken. But look at the effect this has. No spokesman means no individual for the media to fixate on and that means the message can’t be diverted very easily.
Compare this to the WikiLeaks situation. Julian Assange quickly became the focus of the controversy. His organization made the leaks but Assange’s personality was quickly the story and it was instantly trashed up to and including arrest on specious charges related to sexual misconduct. In short order the controversy became the man and the issues he’d over which he’d hoped to spark a discussion evaporated when a more salacious story became available — one that required much less effort on the part of the fifth estate to bring to us. This well-worn script suddenly isn’t wearing well.
Occupy Wall Street (and similar protests) has none of this and, to borrow a metaphor, it seems to be cloud based and very social. It resembles the protests of the Arab Spring. We never heard about leaders and messages or anything else from Tunisia, Egypt and Libya and we didn’t need them. We knew what was going on. All of these movements have social media as a rallying point that loosely coordinates activities and spreads the protest from city to city.
This is a big new lesson about mass movements in a democracy and the growing power of social media and those gadgets we carry in our pockets. For instance, not long ago (March 2011), Tom Glocer, Thomson Reuters CEO, told media executives in the Middle East, “Systematic denial of freedom of accessing information will lead to a revolution.” http://bit.ly/peVHwn The headline from the site Emirates247 said he called the internet a basic human right.
At least in the Occupy Wall Street situation, there’s no shortage of information and it’s readily available as is the basic story (just as in North Africa, no one had to tell people they were oppressed by corrupt regimes). What’s fascinating is the way people have chosen to use the internet and what they know. They’re curiously united but they keep their distance from the center of it all, which could easily bring the movement down.
In the days before all of our new social and mobile technology it may have been necessary to operate close to the center with leaders and manifestos. How else could people rally others to their causes? Social media does that work now and it is work done friend to friend. New technology has caused some people to think differently about how best to unite and get a message out. They are ahead of the curve, operating out of the reach of conventional media and political jujitsu. This is both instructive and beautiful. Like watching a no hitter in progress.
Marketing has become the new hot spot in CRM. During the recession and even before, there was a great flurry of interest in customer service and related things. Consequently, we have seen a lot of attention being paid to customer experience and much of the social media oriented growth in that period was centered on the existing customer.
As the economy has begun to improve the orientation has been more toward sales but with a decided twist. By their actions, vendors have made it clear that they understand that the rule of the day is cross selling and up selling the customer base. That’s a big difference from rushing out to sell net new brands, products and categories. With that shift it becomes more important than ever to market well and at a macro level that spells the rising importance of marketing automation. This might seem redundant but it is not.
When we sell net new categories marketing is rather bare bones. Uber-marketer Thor Johnson describes marketing in explosive new markets as PR and brochure marketing and he has a point. When the world is a green field you need little more than a list of names to cold call. But the tenor of these times requires more incisive understanding of customer motivations and needs, hence the emphasis on data gathering through social and other channels, analytics and even revenue performance management.
I have written about all of these ideas before but the difference between then and now is that I was early then and today the change is upon us. You don’t need to look far for proof. The Salesforce-Radian6 nuptials are proof enough but if that was the only proof point you could be skeptical. However, numerous indicators suggest that this is real. Revenue performance management (RPM) with its emphasis on embedding analytics into sales and marketing business processes is a case in point.
RPM is all about building greater certainty into the sales process and if you dig a little it makes perfect sense. When selling into an established customer base the demand is relatively lower than it is when selling into a new market but the costs don’t change much. Consequently, a smart vendor will not simply chase every suspect but gather evidence of need, demand and ability to pay before committing expensive sales resources. Depending on the market, the vendor might forget all about direct sales and opt for channel representation or retail selling, each of which off-loads significant expense.
The reasons are manifold. Margins are smaller the second or third time around and subsequent products have to pack more value. Look at your latest wireless phone, how does it compare in features and functions with the device you had at the beginning of the century? Now, how does your monthly wireless bill compare with the bill you paid ten or more years ago? I rest my case.
All of that speaks to an era when marketing is ascendant. The last time something like this happened, in the US at least, manufacturing was king and we were able to stamp out any number of products for pennies. To keep the engine of commerce running we marketed the heck out of products and ushered in the golden age of advertising abetted by the rise of new technologies ideally suited to mass marketing — broadcast medial.
The situation is not identical today. Manufacturing went to ultra low wage countries and we became an economy dominated by the service industry. Smart vendors have tried to raise the idea of service to an art form calling it an experience and, of course, the experience starts with marketing, and our own new messaging technology, social media.
This entire preamble has a CRM point. If you look at the major CRM suites marketing is, in many cases, under-represented. It is a sub-division of accounting in many places and that might be a good thing. Before marketers could take an equal place in a company’s revenue discussion, they had to learn to talk the corporate talk. In addition to the usual lingo of clicks, responses, placements and square footage, marketing has had to learn the language of ROI and it has done that or at least the process is underway.
Today, in addition to the understanding of the art of marketing, advanced marketers are speaking the language of cost per lead, campaign ROI and revenue. This change comes along at precisely the right time as vendors in both B2B and B2C worlds grapple with a dynamic marketplace where success requires more than brute strength cold calling or uninspired retailing.
In this environment I expect to see more of the established CRM companies taking a second or third look at marketing and to strengthen their offerings beyond the basics. This makes for an interesting time if you happen to be an independent software company specializing in marketing, social media marketing or analytics. The IPO market is beginning to build but as the Salesforce-Radian6 deal shows, a good company doesn’t necessarily need to IPO in order to have a big payday.
Have you heard about Klout.com? I bet you have because the Twittersphere did what it does best when friend Esteban Kolsky brought our attention to an article in the Boston Globe about social scoring upstarts Klout.com and PeerIndex.net in Friday morning’s edition (“Ascent of the social-media climbers”).
Kudos to Kolsky who lives in the Rockies and was up early and reading the feeds from eastern papers, I guess.
According to the article these and other social scoring sites do for your personality what Faire-Isaac did for your mortgage. The secret sauce is a set of algorithms that develop a score based on a 100 scale to determine what a big swinging er, twitterer, you are. Number of followers, people you follow, your networks, lists re-tweets etc. go into a grinder an out pops your score.
The upshot? Hard to say, Kolsky calls it a caste system, I say it’s anti-democratic. It has to be a cast system because it imposes a hierarchy on a random population. Any population will provide you with a Bell Curve of any attribute.
People will try to game a system when they don’t like being in the fat middle of the curve. Everyone would rather be out on the long tail but that is, by definition, not possible. Some people will be out there but most will still be in the middle because the harder we all try the more the curve simply shifts to the right. The only significant casualty might be the left long tail, which we will see to scrunch up like it is being pushed into an imaginary wall.
The article suggests that vendors might offer preferential services or promotions to people with, and I hate writing this, Klout as in high Klout scores, almost as a defensive measure. You might be happy to risk upsetting someone with a Klout score of, say 45, but you would go way out of your way to avoid ruffling the feathers of a person who scores an 80 or 90. I can see a discussion between a boss and an employee: “I know he has a 90 but the 45 was here first!” L – O – L! Sheesh!
Imagine providing your Twitter handle as a regular part of filling out an online form or registering at a hotel and you have all the makings of a caste system. A whole industry may be dawning or perhaps publicists will need to develop one more skill — finding ways to up a client’s Klout score. Heck, I bet they already do it. Reminds me of high school.
In business, much the same would hold. A company’s Klout score could be a powerful marketing edge but this isn’t new. If you’re a regular reader of this space you know that on a “busman’s holiday” I once tried to gauge the negative rankings of a variety of companies and non-profits. The idea was to perform a Google search on “company name-sucks”. The simple searches turned up a lot of interesting data and while not really scientific enough to rely on, let me just say I wouldn’t ever want to be an oil company or even be compared to one. But at least that methodology gets some data into play — people have to provide reasons for their negative analysis which they do through blogs or other postings that are usually specific. And, no surprise, every company has its detractors. What to do?
At the end of the day, a Klout score measures a certain kind of behavior. Like a credit score, which measures promptness at bill paying and personal debt — valuable things to know in evaluating credit worthiness — a Klout score measures a very different kind of behavior and it might not be relevant.
To me, a Klout score simply measurs a person’s extrovertedness. About a quarter of the population can be classified as introverts. Introverts are not necessarily shy, they simply keep their own counsel and need camaraderie less. I bet they rely on social networking less, too. That’s about the same portion of the population that is left-handed. But we don’t score left-handedness unless we have a radar gun and go to spring training, but I digress.
This reminds me of an excellent article by Malcolm Gladwell in his book, “What the Dog Saw”. The article, “Late Bloomers”, compares the careers of Picasso, a boy genius, and Cezanne, an artist who didn’t hit his stride until much later in life. Each produced great art. The subtitle tells the whole story — “Why do we equate genius with precocity?”
Why indeed?
