Local doesn’t scale. Local isn’t McDonald’s, even if the McDonald’s is right down the street. Local doesn’t send profits back to a home office somewhere else. Local is something that’s part of what makes where you are unique. As unique and flawed and loveable as your own kids. Something is authentically local if it’s the first thing you’d want an old friend, visiting from the other side of the world, to see. It’s authentically local if its disappearance could potentially break your heart.
Local is suddenly the newest, hippest, most lucrative frontier. The local advertising market alone is estimated to be $100 billion a year. Companies like AOL, Google, Apple and Groupon all want a piece of the action. Some of the devices they sell you are even collecting data about everywhere you go – all to help their local campaigns.
Certainly big corporations add a lot of convenience and consistency to our world. They also threaten to homogenize it. If you want home to feel different from everywhere else in the world – or if you want a world that’s interesting to explore, support what’s authentically local. Know the difference, and vive la difference!
Just today, I was on a panel at the annual VBSR conference and responded to a question along these lines. Many folks in Vermont prefer to eat local and shop local, but do they click local? That is, they prefer the locally owned coffeeshop over Starbucks, and the locally owned hardware store over Home Depot or WalMart… but do they think about iBrattleboro vs. Facebook in the same way?
An interesting piece by Bernard Lunn on Read Write Web recently. In part…
… the thought that kept coming back to me is that Facebook’s bravado, its “grand vision” talk, is what you would expect from a concept-level startup. Surely by now, about 6 years into its venture, Facebook should show some substance? It is time to deliver some real financial results. The concept-level talk is great for attracting capital and talent. Facebook has done that brilliantly. But the point of attracting capital and talent is to be able to generate financial results.
Anybody who criticizes Facebook’s financial results gets accused of being small-minded, of missing the point, of (gasp!) “not getting it.” In digerati circles, not getting it is like having body odor. Facebook is changing the world, they say. It is a new form of communication, akin to the printing press. Once you get to scale, profits always follow. Google created a service without knowing how to monetize it.
In fact, far too much money has been invested (in both Facebook and hundreds of “me too” ventures) based on that one premise, that “Google created a service without knowing how to monetize it.” The statement is true. If it had not devised the AdWords revenue model, Google would perhaps have sold some kind of enterprise search technology to Fortune 500 companies and rented banner ads on its home page. With AdWords, it found the perfect native revenue model for search, meeting two contradictory needs at the same time:
- Do not irritate or interrupt the user, and even occasionally add value for the user.
- Provide a compelling value proposition to paying customers.
The problem is that Facebook does not seem to have a clue how to do that. Google did not wait 6 years to unveil AdWords, and when it did unveil it, revenue and profit took off like a rocket. Facebook keeps trying. But to date, its attempts look weak and subject to diminishing returns.
There is a world of difference between increasing returns (what Google gets) and diminishing returns (what Facebook gets with its current strategy). That one-word difference equals billions of dollars.
… Facebook’s revolutionary alternative is to allow consumers to invite brands to communicate with them, like we used to invite companies to send us emails. That would get over-used and spammy in a heartbeat. Highly innovative brands would do well, as they always do in a new medium, but the law of diminishing returns would apply. By the time this model scaled, and it would have to if Facebook wants to move the revenue needle, users will have switched off in droves.
These are the diminishing returns. The more the model scales, the more it will irritate users, and the more users will switch off, and the sooner growth will slow down and reverse. As with email, Facebook can “make up for this with volume.” But unlike with email, which is virtually free, Facebook has to pay money to serve each user.
Sorry, “Coca-Cola wants to be your friend” is in no way an enduring revenue model. If it sounds phony, maybe that is because it is phony.
The one lesson from social media marketing is that authenticity matters. What no one has shown — and methinks this would be impossible — is how to scale authenticity.
This is where behavioral marketing supposedly comes in. Wired calls this the “third rail of Internet marketing.” … Or, as Wired puts it, “As the Beacon debacle showed, there is a fine line between ‘targeted and useful’ and ‘creepy and stalkerish’ — and so far, not enough advertisers have been willing to walk that line.”
Facebook talks a great game about helping the world to communicate. It tries to sound like a group of benevolent revolutionaries. But then it turns to really old-fashioned tools to make money. Its basic message to marketers seems to be, “We have ’em locked in. Yep, Google can’t see them, so we are the only way to get to them. And not only that, we can tell you what every one of them is doing and saying right now. Step right up, folks!”
The one thing that Facebook has on its side is trust. Users trust the company with their real identities. That is massive. Break that trust and bye-bye.
[grr… can’t get the video to load here or onto YouTube… hopefully WPTZ will keep them accessible on its site for awhile.]
And some newspaper coverage of our journey is here.
It’s always a kick when our baby, Front Porch Forum, helps deliver something particularly amazing to our lives… like this whole DC experience.