Is Facebook Building the 21st Century Procter & Gamble?

Back in 2008, I had the chance to lead P&G’s Joint Business Planning with Facebook (as well as the other big digital media players).  The intent of the Joint Business Plan wasn’t about just increasing advertising dollars.  It was about knowledge sharing between the two companies with the goal of having a strategic relationship where we both became better businesses as a result.  This cultural exchange was about P&G accelerating our digital knowledge, while Facebook learned how brand marketers thought. Following the announcement last night of their purchase of WhatsApp, it looks like Facebook didn’t just learn how to think like P&G but maybe how to become P&G as well.

What I mean is that Facebook appears to be using the Procter & Gamble playbook for building a “house of brands.”  This playbook is about building a portfolio of businesses that often will compete against each other but ultimately giving your company a larger market share.  For instance, P&G’s global laundry market share is around 31%. This includes brands like Tide, Gain and Ariel, each of which contributes above $1 billion in annual sales.  But they also have brands like Bounce, Downy, Era and others that all compete in the same space.  The same goes for Baby Care with both Pampers and Luvs, as well as Hair Care with Pantene, Head & Shoulders, Aussie, and Herbal Essences.

Facebook has a history of being active in the acquisition space, with WhatsApp being their 45th purchase.  But historically, all of their purchases were either acqui-hires for the talent or a foundation for a future Facebook feature.  For instance, Hot Potato became the basis for Facebook Places and Karma became Facebook Gifts.

But this might be changing.  The first indication was the purchase of Instagram in April 2012.  At the time, Instagram CEO Kevin Systrom wrote bluntly in a blog post that, “Instagram is not going away.”  As we near the two year anniversary of that deal, those words have held true and Instagram is an even stronger brand today than it was back then.  With the WhatsApp purchase, the key message track for Zuckerberg and company is that “WhatsApp is on a path to connect 1 billion people.”  The talk isn’t around how WhatsApp will fix Facebook Messenger but instead its all about the potential of the WhatsApp brand and service.

If you look at P&G’s Purpose, they say that they “will provide branded products and services of superior quality and value that improve the lives of the world’s consumers, now and for generations to come.”    Facebook on the other hand talks about their purpose being “to give people the power to share and make the world more open and connected”   With the addition of WhatsApp and Instragram, you could argue that these purposes are becoming more and more similar.  Facebook now has three “branded products and services of superior quality and value that improve the lives of the world’s consumers” to “share and make the world more open and connected.”

People were shocked at the price of Facebook’s purchase of Instragram in 2012.  And there is even greater disbelief as the WhatsApp acquisition goes down as one of the largest M&A deals in history.  But in many ways, both of these deals are similar to the moves P&G made to buy Gillette for $57 billion and Clairol for $5 billion.   With Gillette, P&G gained one of the strongest male grooming brands in the world, while Clairol was a foundation for the scale of P&G Beauty.   For Facebook, WhatsApp has the same role in Messaging, while Instagram offers it for Photos.

In the end, Facebook is following the same strategy of building a House of Brands that has built the great CPG companies like P&G, Unilever, and Nestle.  I’d say they clearly learned something about building brands during all those Joint Business Plan meetings years ago.

Brand Managers should be watching the F8 Developers Conference

This week, Facebook will hold its annual F8 Developers Conference in San Francisco.  Much like Apple’s WDC, this event has become the time of year when Facebook announces the biggest changes on their platform.  Given the 800MM+ users on Facebook and the $2 billion plus in advertising spent on the site, that means F8 is in turn a must watch event for Brand Marketers.

So what should Brand Managers be on the lookout for this week?  Based on rumors and leaks, it looks like there should be at least three announcements of interest:

Mini News Feed:

When Facebook is testing new features on the site, they occasionally leak out to the general public.  One such escape into the wild was the “mini news feed” that appears on the top right hand corner of the screen, following a user throughout the site.  This change is pretty significant because it has the potential of changing how people interest on the site, increasing engagement as updates become even more in your face.  This has the potential to be a win for brands for two reasons.   First, there is a good chance that Sponsored Stories will appear here, which only increase the visibility of that ad format.  Second, Brand Page updates will also appear in this feed, increasing the chance that consumers will actually interact with the content your brand publishes.

Facebook Music:

The only area where MySpace still had an edge on Facebook was in entertainment, particularly music.  That looks to change this week with the launch of Facebook Music.  Apparently Facebook will be partnering with at least 5 music services including Spotify to launch a platform similar to Facebook Games.  Much like the way Facebook uses game developers to do the heavy lifting on creating the games, Facebook will be the front end / dashboard for these music services.  Given what Facebook already knows about a users interests / tastes, this will be an interesting angle for music discovery.  It will also be interesting to see how deeply Facebook embeds their Credits system into the music services.  Regardless, music is one of the most popular marketing channels of brands and there will be immediate opportunities for a multitude of music promotions with Facebook now.

Facebook iPad App:

TechCrunch confirmed the news of this launch several weeks ago but this one is way overdue.  Tablets are a great viewing platform for Facebook and its been a glaring miss for both that no app existed.   The launch of app itself doesn’t really create any new opportunities for Facebook but it does create another channel for increased engagement on the platform.

5 trends that could take down Facebook

A couple of weeks ago, the folks at iMedia Connection reached out to me with a provocative question – could I write an article on the 5 startups that could take down Facebook?  I couldn’t resist the prompt so I proceeded to reach out to some of the folks I respect the most in the digital media space including entrepreneurs, investors and brand marketers.  What I uncovered along the way is that Facebook’s biggest threat wont come from a single startups, but likely several emerging trends that could pose a threat.  I’ve reposted the article below or you can read the original over at iMedia Connection.

5 trends that could take down Facebook

It’s hard to argue Facebook’s momentum. We are talking about a company that has over 500 million active users, was valued by Goldman Sachs at $50 billion in January 2011 (and $75 billion by secondary markets in March 2011), and is so popular that Hollywood made an Oscar-winning movie about its beginnings. You are also talking about a platform where every month, more than 250 million people engage on external websites, with 80 of comScore’s U.S. Top 100 websites having integrated with Facebook.

Given this momentum, it’s tough to envision a future where Facebook is not one of the dominant players in the digital landscape. But at the same time, history is littered with the stories of digital goliaths who stumbled from their pedestal (think Netscape, AOL, Myspace, etc.) Could this same fate be in store for Facebook?

That is the very question I posed to a group of entrepreneurs, digital marketers, and venture capitalists. Could they see a future where Facebook’s dominance has been challenged by a new breed of start-ups? And if so, what start-ups today could one day “take down” Facebook?

From those discussions, it appears there isn’t a single “Facebook killer” that will sink the social networking giant. Instead, Facebook is faced with the emergence of several themes (and multiple start-ups) that could one day prove a threat to their business.

Here are five emerging themes that Facebook should be afraid of.

Creation of vertical, interest based networks
The very thing that led to Facebook’s growth (a standardized and unified experience) could also prove to be a kink in its armor. Gautam Gupta from General Catalyst Partners pointed out to me that “Facebook’s market share of time spent on web is driven by the utility it provides to consumers as a social network.” This broad social network will continue to have its place, but people are increasingly being drawn to vertical and interest based networks to meet specific needs.

A prime example can be seen in the business world where you have LinkedIn going public with over 100 million members, Quora gaining tremendous traction through its appeal to the start-up ecosystem and ResearchGate connecting 900,000 scientists in more than 192 countries. You could argue that any of these communities could be built on Facebook, but their success proves the appeal of a concentrated, interest based network. The appeal of niche networks extends beyond just business. For instance, GirlsGuideTo bills itself as the “ladies only” guide to 20-something lives on everything within the good, bad, ugly, and taboo.

Notions of trust and privacy
The issues Facebook has faced with privacy have been well documented, ranging from the launch of Beacon to debates around privacy settings on the site. This has continued with their latest product launches, as some have remarked that a major barrier to Facebook Places is the fact it broadcasts to an extended Facebook social network versus the more curated personal networks of a service like Foursquare.
This notion of trust and privacy is going to continue to grow as a theme that consumers are deeply concerned about in the coming years. For instance, Diaspora is a new, open-sourced social network that was created specifically as a response to the privacy “hiccups” of Facebook. Its mission is pretty succinctly stated through Diaspora’s tagline of “Share what you want, with whom you want.” Path builds upon this by creating what it calls a “personal social network” composed of only your closest friends and family. This “personal social network” is reinforced by limiting a person to only 50 connections on the site. In a more practical application, Ziplist creates a private way for me to easily share my grocery shopping list with other household members. After all, the entire world doesn’t need to see when we need to pick up toilet paper.

Discovery of people, places, and information
Some of the most interesting start-ups today focus on helping people with “discovery” of new people, places and information. For instance, Color provides “elastic social networks” based on where you take photos, what’s in them and what’s around you when you do. StumbleUpon and Tumblr provide a similar sense of discovery on the web. At the core of this discovery ability is the “permission premise” that was called out by Nick Seguin, a partner at Dynamit and Manager of Entrepreneurship at the Kauffman Foundation. As Seguin pointed out to me: “The majority of people utilize the Facebook platform to keep up with acquaintances versus consuming important information. Twitter and Tumblr allow this discovery of information without having to worry about a relationship (or a perceived one.) It’s important for individuals to curate the information I consume in those environments. The friend dynamic is great, but also restrictive for Facebook in this regard.”

Joe Medved from Softbank points to mobile as another particular area of “discovery” that could prove a hurdle for Facebook. According to Joe, “Social networking services focused on discovering others, where you can build a somewhat virtual persona, or better yet an embellished version of your real persona, have potential. Ninety percent of social networking users in Japan don’t use their real name, which is why there are 3 social networks, 4 if you count Twitter, with around 20 million users, as opposed to one dominant player like Facebook. The vast majority of social networking activity in Japan is on mobile phones. As smartphone penetration goes more mainstream in the US, mobile centric social networking services leveraging smartphone capabilities have the potential to take share from Facebook.”

Need to motivate human contact
With the rise of digital over the past decade, the definition of “friends” has certainly changed. While Facebook was started with the intent of being only focused on real relationships, the site has evolved to the point where your social network is much broader. At the same time, you could argue it is really not enough to have an online only relationship or even one that is primarily digital (i.e., the folks from high school you haven’t seen in over a decade but are “friends” on Facebook.) This has left the door open for companies who motivate in person interaction. One such company that capitalizes on this inherent Facebook weakness is Meetup, whose mission is to “to revitalize local community and help people around the world self-organize.” It is a mission that is definitely working, with over 250,000 monthly Meetups in over 46,000 cities worldwide.

While Meetup was one of the first to recognize that digital could actually be an enabler of human contact, many more have followed suit. For instance, Skillshare allows you to “learn anything from anyone” by connecting with folks in your community who have a skill to share. GrubWithUs tackles the problem of meeting new people in the years after college by “building friendships over food.” Wednesdays takes a similar approach of meeting over food, but is instead focused on coordinating lunches within an organization. All of these companies are capitalizing on the basic need for human interaction, but using digital in new and unique ways to do so.

Consolidation, curation, and control of entertainment
On the backs of social gaming companies like Zygna, Playdom, and Playfish, Facebook has emerged as a major player in the world of gaming, helping invent a new category along the way. But outside of “social games,” Facebook has been slow to capitalize on entertainment as an overall vertical. This was one major reason that Myspace briefly attempted to rebrand as a “social entertainment” site focused on sharing and finding music, television, games, and movies. And in a more successful example, this is why services like Pandora, YouTube, and Hulu have been able to flourish in their respective spaces.

Given the size of the entertainment vertical and its importance to consumers, it is somewhat surprising that Facebook is still largely ignoring the space. This opens the door for additional companies to move into the consolidation, curation, and control of entertainment. For instance, Rovio was able to create its Angry Birds franchise without overreliance on the social graph of Facebook, instead focusing on iOS and Android. This move towards mobile also opens up new opportunities to monetize entertainment leveraging platforms like TapMe. Outside of gaming, you have other start-ups combining elements of social networking with entertainment. As an example, Spotify has 10 million subscribers — one million of which are paying subscribers — in Europe that have created 200 million playlists. Spotify specifically calls out “social music” as a feature that makes it easy to share everything you listen to on Spotify with your friends including tracks and playlist.

Conclusion: Facebook is the suburbs
There is no question Facebook will continue to dominate the digital landscape in the coming years. But there is a very real chance that alternatives will emerge reflecting the evolving needs of our population. As Phin Barnes from First Round Capital stated when I asked his opinion: “One argument is that Facebook is the suburbs and we need to see networks that more closely resemble the diversity of dense urban living and the trust/community of small rural towns.” In this regard, Facebook’s biggest threat might just be the needs and wants of the same constantly evolving community that built it in the first place.

“Play on, Players” – Rockfish gives you reasons to “like” Bicycle Playing Cards

Bicycle_Facebook_Reasons

As we started up the Cincinnati office of Rockfish last Fall, we had a “wish list” of brands that we hoped to work with.   At the top of that list was 143 year-old, Cincinnati-based US Playing Card, maker of Bicycle, Aviator, and Bee.  When you think about classic brands, you can’t do much better than their portfolio.

On the other hand, playing cards are the classic type of business that are being disrupted by digital.  On the heels of the poker craze of the 2000′s, card playing is still extremely popular.  But today, people are as likely to play cards on Facebook as they are to play around a table.  This fact was not lost on US Playing Card, which was one reason they named Rockfish as their Digital Agency of Record earlier this year.

Last week, we had a chance to bring our first work to market as part of our partnership with Bicycle and US Playing Card.  Under the new tagline of “Play on, Players”, we helped Bicycle relaunch their social presence including:

  • Newly redesigned Facebook Page: Exclusive limited edition cards (including this awesome Big Gun Military Deck), rules to play your favorite games, and great giveaways.
  • YouTube channel: The source for the best playing card videos…from magic to card games to cardistry
  • Relaunched Twitter: Featuring exclusive products, special videos, tips and discussions.

There is going to be even more exciting work coming from Bicycle and US Playing Card in the coming months.  If you want to be the first to hear about it, be sure to like Bicycle on Facebook, follow them on Twitter and subscribe over at YouTube.  I promise that you won’t be disappointed.

Facebook’s latest profile update is about advertisers, not consumers

As you have probably heard by now, today Facebook introduced improvements to profiles on the site.  As they called out in the blog post announcement:

The new Facebook profile makes it easier for you to tell your story and learn about your friends. It now has more room for your photos and experiences, and it includes new ways to share the things you care about most.

While the announcements make it sound as if the improvement are about Facebook users, I would argue it is really about Facebook advertisers.

One of the major reasons Facebook is emerging as such as an intriguing advertising platform is the targeting capability that it gives brands.  An advertiser is able to specifically target a person through the information that is available in their Facebook profile.    This information goes far beyond simple age / sex / location and includes everything from music tastes to political views.

But the problem is that very few people spend the time to update their profiles on a regular basis.  As a result, much of the information that marketers are using to target is either out of date or not as reflective of the person as it could be.

I personally think that the new profiles are an attempt to change that.  By elevating and enhancing the way information is displayed in the profile, Facebook is hoping to trigger people to update their profiles.  Obviously Facebook would like people to keep the profiles updated, but this release at minimum provides a trigger to get people to make the change this one time.  And with that update, people will be providing more valuable data to Facebook and its advertisers.