Posts Tagged Facebook
Giving PayPal Some Pushback
Today I paid for an item online using PayPal, which would not usually be a blog worthy activity. But this time it was a frustrating experience, due to a recent (apparently) change PayPal has made in the process.
In the past I’ve enjoyed using PayPal, and always chose to use a credit card. This way any issues with online retailers would be easier to deal with, rather than taking the money directly out of my checking account. Plus, like all Americans I’m protected against any credit card loss over $50 by federal law. The law pertaining to direct payments and debit cards is much less clear.
I made a payment through PayPal with my credit card less than three weeks ago. As it turned out, the retailer didn’t have the item, and reversed the charge on my card. Had they already received the money from me, the rebate process would have been more complicated.
But today when I went to make another purchase, the ability to make my credit card, as opposed to my checking account, the source of PayPal payments was gone. I was forced to make a payment directly out of my checking account, with no option to make my card the funding source. It’s not under My Account, Profile, or anywhere else I can find. To top it off, trying to use the help function gave me inaccurate information.
I’m not happy about this at all, for the reasons above but also for the sheer coercion. I understand the economics — it’s more economical for PayPal to have customers use the direct payment option, since they don’t have to pay a percentage to the big card networks like Visa and Mastercard. But if that’s the case, PayPal should incentivize users to do so, not force them. If this change is permanent, I won’t be using PayPal unless I have to.
With the economic downturn, I’d predict we’ll see more of these types of decisions being imposed on online customers. The struggles of online networks like MySpace, Facebook and YouTube to monetize their traffic have been well documented. Last year saw the fiasco of Facebook’s Beacon advertising plan, where users’ activities were tracked without their consent, even on sites outside of Facebook. In the face of widespread protests the company allowed user to opt out, and CEO Mark Zuckerberg eventually had to apologize. Jacqui Cheng of Ars Technica from last December: http://tinyurl.com/2at552
And this year they have a large scale protest on their hands over the mandatory redesign of the site design. Over 2.5 million users may boycott the network next week — story by Juan Carlos Perez of IDG News: http://tinyurl.com/4l2vq5
In the immortal words of Larry the Cable Guy, “What the hell is this, Russia?” Social networking and the Internet in general are supposed to be about personal empowerment and a redistribution of choice and freedom to the individual. Surely the sharp minds that created these exciting services can think of a better way to make a profit than engaging in online authoritarianism.
1 comment October 15, 2008
Facebook Experiments — Advertise At Your Own Risk
If you’re Mark Zuckerberg, you’ve got to find a way to monetize the huge traffic Facebook attracts, which they recently claimed has grown to 100 million active users. Advertisers want to reach this mostly young, tech literate demographic. Last week Facebook announced a new beta program that could work for some companies but not many, and changes a fundamental aspect of advertising.
Called Engagement Ads, these placements can be edited by users with comments, saved to Fan pages and sent to friends as virtual gifts. Cnet’s Caroline McCarthy provides a good rundown, with information first reported by Forrester’s Jeremiah Owyang:
http://news.cnet.com/8301-13577_3-10025181-36.html?tag=nl.e703
Since the goal is a large degree of consumer interaction, established consumer brands would seem to be the only advertisers that would fit. Consumers need to know what the product is before they interact with it — smaller less known companies need not apply. But the really revolutionary aspect to me is the ability of consumers to editorialize on the messaging.
Like it or hate it, one of the constants in advertising is the fact that the advertiser controls the message. That degree of control is often contrasted with public relations, in which you “earn” media rather than buying it and don’t control the final message. Engagement ads change the equation — you’re purchasing advertising but don’t have control, since the message can be changed by the audience.
This may lead to spectacular viral success, depending on the enthusiasm level of the brand following. But it can also lead to spectacular failure, if aggrieved consumers use the power of Facebook networking to spread negative comments about the advertiser. Owyang says it the best — Facebook is experimenting, and that means caveat emptor for advertisers:
“Facebook is throwing all kinds of pasta at the wall when it comes to marketing and to see what sticks,” Owyang said. “They haven’t figured it out, and unfortunately, they’re using brands as the guinea pigs and their customers. They really have to make it clear to their community what works and what doesn’t, and develop best practices sooner or later.”
At Strategic Communications Group we counsel clients on how to participate on social networks like Facebook. For all but the biggest consumer brands, there are better ways to identify and engage the right groups on Facebook than experimenting with Engagement ads.
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Add comment August 27, 2008
The “Business Model Later” Approach
I read a Peter Whoriskey Washington Post article on web radio provider Pandora this weekend that had me shaking my head. The company has over one million users and is one of the most popular iPhone applications, but it may have to cease operations:
http://www.washingtonpost.com/wp-dyn/content/article/2008/08/15/AR2008081503367.html
Pandora founder Tim Westergren admits the company isn’t making money, and is looking to Congress for help:
“We’re losing money as it is,” said Westergren, a former acoustic rocker. “The moment we think this problem in Washington is not going to get solved, we have to pull the plug because all we’re doing is wasting money.”
The article claims the problem is a change in royalty formulation, but I came away thinking the problem is deeper than that specific issue. It seems to me the company made some cool technology available online, without any clear idea of what the business model might be for the service they were introducing.
Pandora is far from alone in its predicament. Facebook has been the darling of business media since Microsoft’s investment last year gave them an estimated valuation of $15 billion. But last month CFO Sheryl Sandberg said growth comes first, and then they’ll worry about monetization, as reported by Stefanie Olsen of CNET:
Our focus is on growth–we believe this is the moment people are joining social networks,” Sandberg said here at the Fortune Brainstorm Tech conference, a three-day gathering on technology and media. “Then it’s monetization to support that growth.” http://news.cnet.com/8301-1023_3-9996796-93.html
I have seen this atmosphere before, up close and personal. Back in the early days of online advertising I was running communications at Advertising.com, now part of AOL/Time Warner. The mantra from the market was growth, not profitability. So we focused on getting big fast. But at least we had an established business model based on advertising — a proven one that translated well from the publishing world. So when the stock correction/crash of April 2000 hit, it was possible to trim our sails and focus on profitability.
After reading the Post piece, it seems like Pandora just didn’t think the economics piece through before launching. Wouldn’t you expect there to be legal issues since you’re making copyrighted material available? And wouldn’t you expect opposition from satellite and over the air radio — since when have entrenched business interests been easy to dislodge?
Compare Pandora’s approach to that of iTunes. Love or hate Steve Jobs, there’s no doubt Apple had a very clear idea of the business model before they launched iTunes. It has totally changed music consumption, restored the viability of the single and will eventually foster a conduit from performer straight to consumer. I found an excerpt from North Carolina State Professor Michael Rappa’s “Managing the Digital Enterprise” iTunes case study that states it very well:
Obviously there are many components. There’s the brilliant software and beautiful hardware, all tied up together with the content. But it was the business model which, I think, provides the glue that holds all this together, and makes it profitable for Apple to maintain sustainable business. So as we look deep into iTunes, one of the things that we see right away is just a kind of creative ferment, in terms of the ever expanding amount of content, not just along the trajectory of more and more songs. Yes that’s true. But through a kind of variety of other kinds of content, and through some of the kinds of tools that we’ve seen before, in terms of things that help customers both find what they’re looking for, find things they’re not looking for, and to kind of pull together a wider opportunity, in terms of helping the music consumer find and purchase music.
Another key element in this overall strategy was to strike an agreement with music distributors, the major music distributors, as well as hundreds of independent music publishers, to more or less tag song purchases to a kind of anchor 99¢ per download, getting it under that psychological $1.00 point that just, I think, is locked in people’s minds as a kind of fee anchor point, in terms of people’s spur decisions to purchase and enjoy music. It’s just really two facets: one, bringing it down to such a low price by being able to download individual songs, in a sense now unbundling the notion of an album or CD as an entire work that one would have to pay $12.00, or $14.00, or $15.00 or more, and two, having a motivation maybe to buy a single song, or one or two songs by an artist.
http://digitalenterprise.org/transcripts/itunes_tr.html
For the record, I enjoy using Pandora and totally understand the appeal of cool technology, distinct from any profit motive. Private firms are sometimes better able to invest in technology, since they are not subject to the quarter by quarter scrutiny of public companies. And if you have your own money, you can dabble all you want — see Google, and Paul Allen. But popularity isn’t automatically going to morph into profitability all by itself.
Westergren decided to take VC money, which means he had the responsibility to figure out how Pandora could become a sustainable business. Shame on them or shame on him, I don’t know. But now he seems to be throwing up his hands:
“We’re funded by venture capital,” he said. “They’re not going to chase a company whose business model has been broken. So if it doesn’t feel like its headed towards a solution, we’re done.”
The question is — was it broken, or not there to begin with?
1 comment August 18, 2008
Verizon Outsources Social Marketing to Facebook
I was interested to read a few days ago that Verizon plans to discontinue its branded social community and move it over to Facebook. Their Facebook page has over 18,000 “fans”:
Of course it’s very smart of Verizon to particpate in social networks — Strategic Communications Group has its own page, and we regularly help clients identify and reach out to communities of interest on Facebook. But Facebook pages do not offer all the tools of a true social network site, and it’s a closed environment. On the other hand, the pages are easy to set up and come with a huge built-in audience.
I’ll be joining Verizon’s page to help me determine which phone I should upgrade to — it’s way past time. But until Facebook upgrades its features and opens up its walled garden, Verizon should wait to shut down their own social community located at http://community.verizon.net/index.jspa.
1 comment June 9, 2008
