How Brands Cut Their Exposure to Facebook Business Risk

How Brands Cut Their Exposure to Facebook Business Risk shows how brands can reduce the risks of depending on Facebook too much.

In the Facebook As Investment trilogy, I have analyzed several dimensions of investing in Facebook and raised my doubts about the company’s management and direction. In Part Three, I’ll address how brand executives can insulate themselves from Facebook’s—or any platform’s—fortunes by moving to make their relationships and networks portable. By making and managing investments carefully, brands’ relationships will endure regardless of platforms’ destinies.

By the way, Part One examined how Facebook’s trust gap would make it difficult for Facebook to fully monetize its considerable assets. Part Two analyzed Facebook as a social platform and revealed that it had no competitive threats from other pureplays; rather, the risk was that the whole pureplay category would lose its dominance in 3-5 years.

Seeing Beyond the Platform

Pureplay firms like Facebook, LinkedIn and Twitter have defined language, behavior, features and the very concepts of digital “social networks,” but they are quite expendable when brands manage their investments appropriately. However, brand leaders need to follow the digital ecosystem closely and be ready to adjust quickly. Here are some principles for avoiding surprises. Specific action steps follow.

Assume Pureplays’ Gradual Obsolescence

Watch the ecosystem’s major players, and the interactions among them, but the trend will be specialist sites maximizing value from “social networking” and fading dominance of pureplays. The latter will continue to exist, but they will not maximize value since they are designed for “socializing” (which people can’t resist), not doing things. Moreover, I use “ecosystem” intentionally because it indicates a pervasive, real-time network that increasingly interoperates. Because it’s digital, it’s more dynamic than any human market we’ve ever experienced. Here are brief comments on some of the players:

Facebook is so entrenched, globally, that it may remain the dominant general social network for many years. However, there is a big caveat. Facebook’s management team looks like it’s losing focus due to the IPO and too much time with Wall Street bankers. It’s “using the money it raised” for M&A, purportedly considering entering the hardware market (buying RIM). If Facebook’s management team and core competencies included M&A (like, say, Cisco), I would be confident. But they don’t. If Facebook buys RIM, I would seriously question Facebook’s medium-term relevance and long-term survival. Making phones will not help Facebook sell more mobile advertising. Not even Apple’s best-in-class iPhones may display [much]  advertising due to user backlash. The device wouldn’t help Facebook enough to warrant the distraction, not even close.

An interesting Facebook aside is that the thing about the company that “investors” fear the most—Zuckerberg’s control of the company—is probably its biggest asset and hope. Wall street bankers know little about sociality online. Facebook’s core competency is leading digital development of environments in which people can interact socially. Facebook will have to remain grounded in its core competency, and I fear it will be waylaid. Neither Google nor Facebook+RIM have Apple‘s core competency in hardware design, and Facebook’s software design is quite limited. The “Facebook Shares Plumb New Depths..” post fails to mention that Google’s main motivation in buying Motorola Mobile was its patents. Google is probably smart enough to not entertain trying to be a market leader in the handset business.

Wall street bankers love doing deals (M&A), which historically destroy economic value (researchers estimate the range for failure is between 50% and 80%). Strangely, Google’s acquisition of Motorola Mobile, if Google dreams of designing and manufacturing its own market-leading handset, is a major coup for Apple whose software/hardware experience is probably second to none. If Facebook acquires RIM, that will help Apple, too, because Facebook’s innovation and focus will suffer.

LinkedIn has a far stronger team, and its value proposition to users is closer to money; also it’s a “general” purpose pureplay, it’s focused on “work,” and selling members’ data and access to enterprise functions (recruiting/HR). It will earn handsome returns, but much more quietly than Facebook.

Twitter may or may not endure as it still hasn’t found a strong business model. It is transformational, but I don’t see its long-term viability.

Manage within the Ecosystem’s Context—Not Pureplays’

In the Knowledge Economy, markets are far more dynamic and fast-moving than ever, and the ecosystem is its infrastructure. In Part Two, I predicted the fading relevance of the general social network pureplays, whose platforms vie to cater to general audiences. They will persist as “general connection areas” that will function like infrastructure for general communications, but few people will pursue activities there that they deem “important.” This will limit pureplays’ ROI compared to specialized collaboration spaces that will interoperate with each other and share data according to users’ preferences.

You will best manage your investments in platforms by assuming they will fade because it is better to remain more attentive to the social ecosystem’s dynamics than less. In 2012, most users don’t have a strong perceived value from social networks, except they are hooked on them. But few people understand [how to create] the value. Therefore, they have adopted a binary approach: LinkedIn for business, Facebook for personal. Twitter is seriously used by very few people and struggles to find a value proposition or business model. It is the most vulnerable by far. But the likelihood that any of the “big three” will be displaced by “another” one is low.

Google+ offers an example that proves the point. It is arguably very similar to Facebook and Twitter, but, despite Google’s immense resources, it has not replaced either one (it isn’t supposed to, but that’s another post). Users’ change costs are too high.

Platforms Matter Less than People

Think of your social business initiatives as building relationships, trust and business. Relationships endure disruptions, so form rich, multichannel connections and interactions with your primary stakeholders. To develop a consistent business-meaningful return on social business, you need to be very focused on outcomes that are meaningful to you and your stakeholders. You need to consisently deliver uncommon value to stakeholders, which means you need to know them very well. When you do this, they will follow you anywhere ;^)

When disruptions occur, and you maintain an ecosystem viewpoint, you’ll rarely be surprised, and you’ll already have contingency plans in place. You’ll invite your highest priority stakeholders to new venues. An easy way to think about it: look at platforms as trade shows, restaurants or other venues in which you develop relationships. Constantly evaluate your results, and assume that nothing will last forever. Prepare to move; remain informed, analyze all platforms and refuse to depend on any platform.

Action Steps: Insulate Your Brand Against Surprises

To achieve consistent results in social business initiatives, you need to become very focused, efficient and consistent in developing relationships online. This means making priorities and other choices.

• Conduct a robust ecosystem audit, which should include very specific descriptions of stakeholders, stakeholder rank (to you), stakeholder workstreams (what they are doing online that’s relevant to you) and rankings of the most relevant venues for engaging them.
• Approach the ecosystem as the multipolar world it really is. Note the types of activities or conversations to stakeholders prefer in various venues Use this insight to guide your interaction strategy in each. Remember, just because stakeholders may be members of a platform, that doesn’t mean they like interacting there about the topics with which you want to engage them.
• By interacting with stakeholders in more than one venue, you will: insulate yourself against losing the relationship if a venue fails and strengthen the relationship. [note that “interaction” does not mean serving content; it means relating and interacting one-on-one, which begets many-to-many]
• In your thinking and approach, unbundle platforms’ functions, and approach them as learning opportunities. Explicitly develop competencies in, for example, inviting people, which apply slightly differently in various platforms, but good practices hold true across platforms.
• Develop institutional knowledge about platforms’ social features and behaviors and results by developing a Social Business Competency Team. I can’t say it strongly enough: Human OS is sociality, and social networks digitize big parts of it. Digital social features on the Web will explode. So, organizations need to develop competencies with social features, whether they reside in general pureplays or in specialist sites.
• Create beta projects in which you invite small groups of pre-selected stakeholders to try out your presences on new platforms.
• Don’t heed the 20th century siren song, “Content engages.” Meaningful interaction engages, although content can be a great spark.

What is your practice for assessing and selecting platforms?