JournalStar has an interesting article about pricing strategies and the psychology behind them. It’s always interesting to read about. We often view good buys not in terms of what they are, but relative to something else. If you can control what that “something else” is, you have a lot of control over consumers.
Quote of the day goes to Paul Saffo for his opinion piece on Facebook:
Facebook is the Microsoft of social media; used by everyone but truly loved by few.
I’m not sure I 100% agree with the quote, however it does make a valid point about what not to be as a tech company with a huge chunk of the market share. You really want to be the Apple of social media, used by many who absolutely adore you and highly value your product. I’m not sure there’s anyone in social media yet who has achieved that. The closest so far might be Instagram who is now owned by Facebook. Twitter has its loyal users, but many are grumbling over their recent changes and the ever changing app ecosystem.
Paul goes on to say:
Facebook resembles Microsoft in other ways as well. Facebook’s interface is nearly as clunky and inelegant as Windows, and like Microsoft, Facebook is struggling to migrate off the desktop and follow its users onto mobile platforms like smartphones and tablets. Unfortunately, Facebook’s revenue model depends on ample screen real estate in order to please advertisers without annoying users. Ads that can be tolerated on a laptop become a major annoyance when hogging scarce and valuable space on a smartphone.
Facebook can solve for these problems. Facebook will need to move beyond advertising no matter what. Google’s been trying to figure out that problem for a while now. Advertising only gets you so far. Google’s experimented with things like SaaS (Software as a service) via Google Apps. Facebook could potentially bundle up it’s collaboration, authentication, pieces as an alternative to products like SharePoint and Google Groups. Facebook users generally use these things for personal uses, but Facebook apparently utilizes its own features for it’s own purposes all along. There’s not terribly much blocking them from making that a product itself. Facebook also has vast amounts of data and could make itself into a research platform. Both would be viable options and quite frankly could be killer products.
It’s an amazing thing regardless for a company as young as Facebook to be compared to Microsoft. Lets just hope they can avoid the pitfalls that have hit Microsoft in the past decade.
Now that Marissa Mayer is at the helm of Yahoo, I have just one hope for Yahoo. That they not waste their time and resources trying to build a mobile phone or social network. They are huge and diverse already, to the point where nobody knows if they are a tech company or a media company. They have an almost 0% chance of winning either and Yahoo has a ton of important work to do if it wants to turn itself around. It would be nothing more than a distraction.
It will be interesting to see what happens. Her first mission should be to fix the culture that killed Flickr. Unless she does that, Yahoo is a lost cause.
In an interesting move Microsoft announced it will sell Windows 8 Pro upgrades for $39.99 at least initially. Windows 7 Pro upgrade is about $150. It’s a huge price cut. Also noteworthy is that you can upgrade from one of the more basic versions of Windows 7 to pro. Microsoft also reduced the number of editions down to 4.
Given Apple has been doing under $30 for upgrades, it was only a matter of time. However in Apple’s case, the software is an accessory to the hardware. In Microsoft’s case, they don’t sell hardware. My bet is they are hoping the OS will be the platform to which users engage with Microsoft services.
This is somewhat ironic given Windows 7 was a modest upgrade (technology wise) from Vista. Windows 8 is a complete rethinking and a much bigger investment. The pricing is inverted.
This is Microsoft’s big move to not be marginalized by the internet into the “expensive software that you don’t really need to run a web browser”. Microsoft just kept themselves relevant. The question however is can they make a business out of this strategy?
The impact of that disaster has passed, and supply levels are back to near where they were before last October’s disaster. But while the flood waters have long since receded, drive prices haven’t fallen nearly as much—as InfoWorld’s Woody Leonhard reports, retail hard drive prices are still about 75 percent higher than they were before the flood and show no signs of coming down. And the manufacturers are posting healthy profits as a result.
Nobody is shocked by this right?
Unfortunately for them, this will be short lived. The major HDD manufacturers don’t really have great penetration in the SSD market, which is growing at an amazing rate due to dropping prices and people wanting faster boot times.
Hiking pricing, unwillingness to adapt product lineup to meet demand. I think we know where this business strategy leads.
In both cases corporate culture ironically killed everything they were trying to acquire. In both cases, they could have been huge, had they been agile enough to stay on the bleeding edge.
Gizmodo has a great essay on how Yahoo killed Flickr. I think this excerpt is a pretty good summary:
It was a stunning failure in vision, and more or less the same thing happened at Flickr. All Yahoo cared about was the database its users had built and tagged. It didn’t care about the community that had created it or (more importantly) continuing to grow that community by introducing new features.
It’s worth a read. It’s a textbook example of how not to build/manage a product. Yahoo isn’t in it’s current situation by accident or chance. The upside is there’s a bunch of good lessons for everyone inside and outside of Yahoo here.
Love or hate what Facebook is doing, they are essentially the antithesis. Every decision Facebook makes is seemingly about growing the community and features that increase engagement. There are of course many other ways to fail.
The Internet is a network/community of cooperation. If you forget about the network/community factor, you’ve lost.
I think the question “was Instagram worth $1 billion Dollars?” is incorrect. Any form of that question is. The value of any singular thing is in the eye of the buyer, not the market as a whole. The correct question is “was Instagram worth $1 billion Dollars to Facebook?” To that, I think the answer is yes. To any other company, no.
Value is the relative worth of a good. Water is worth nothing when it’s plentiful. It’s priceless when it’s in short supply. This is supply/demand. Companies are slightly different as they aren’t a commodity, there is only one Instagram. The supply is a constant meaning demand is what dictates value. The demand is based on how much another company (or companies) wants to buy it. This decision is based on how well Instagram’s assets, product line, employees, etc. would benefit them. It’s also based on how much it’s worth keeping away from a competitor, and how much it’s worth avoiding having another competitor. Distractions are costly for businesses. Mitigating them has difficult to quantify but significant value.
A basic company works like this: it creates a product with value that it obtained by customers (freemium products make things slightly more abstract, but this still applies). At some point the product runs out of potential customers either because the entire world who wants it has it (think: Facebook, Google), or customers just grow tired of it (think: Yahoo). The way a company keeps up growth is to introduce new products to add value to the company.
In a perfect world every product would achieve maximum potential and a company’s growth would be at worst a diagonal line, consistent and upward moving. or a curve moving upward at an accelerating rate. We know that’s not realistic.
The reality is most companies have lots of overhead when diversifying the product line. Not every product is a winner. The most notable example of this is Google. They have many products, to the point where I bet few if any Googlers know them all. Most however aren’t generating substantial revenue. Sergey Brin has been putting some effort into reducing Google’s product complexities because of this. Google. Apple famously reduced it’s product line when Steve Jobs took back the company and is highly profitable. Facebook has scaled reasonably well as it’s product can essentially be broken down to: communication (direct messaging, broadcasting), photo sharing, contact organizer. This on a graph looks something like this:
Getting back to the topic on hand, what is Instagram worth to Facebook? Facebook needs to keep on or above the line. That means they need to keep rapidly developing and improving products There’s a reason Zuckerberg put an emphasis on “Stay Focused & Keep Shipping“. Instagram was a distraction to Google. It was the only viable competitor to Facebook’s massive photo sharing business.
Flickr stalled long ago, Google can’t figure out Google+ or Picasa. SmugMug et. al. are to small to matter to Facebook. Instagram was the only photo sharing business with growth that could concern Facebook. Avoiding the distraction that Instagram would be is worth a substantial amount to Facebook.
Instagram being bought by someone else could also be a distraction. Keeping it away has a similar value too.
Facebook has pretty much hit market saturation with its current audience. Facebook is having some trouble in some parts of the world where other social networks have taken hold. To keep growing that means they need to keep growing users. Obviously getting kids to sign up (once they turn 13 thanks to COPPA) is what Facebook needs to keep itself going. Instagram has managed to gain serious traction in the pre-teen market. These are kids who grew up with text messaging and photo sharing. Two of Facebook’s major product offerings. This is a major threat to their future. Why join Facebook and be observed by “friend” parents when you can use your phone (or iPod touch) and remain completely below the radar? Many of them have been doing this for a while now. All they need is WiFi (lots of free SMS apps in App Stores). The incentives to change workflow to Facebook have dropped. Switching over is hard anyway. Just because Child A turns 13 today doesn’t mean all their friends do. Being under 13 on Facebook means fearing being suspended constantly. Facebook purged 20,000 accounts daily in 2011. I’d bet that number is higher now.
These kids have a system of communication that works for them. It’s a very workable system. Facebook isn’t part of that system. That’s a big problem. Buying Instagram means they have a vehicle to convert these new users.
Instagram scaled quite well with a dozen employees and managed to build an app that makes photo sharing extremely simple and fun. The app’s workflow for photo sharing makes Facebook look terrible. Buying this up and integrating this is worth a lot to Facebook. Just like FriendFeed gave Facebook some serious engineering chops, this will as well. the Instagram team’s vision and expertise shouldn’t be discounted. Buying a company for its engineers isn’t uncommon these days.
I wouldn’t be surprised if Facebook launches (or rebadges Instagram into) a Messenger like app that focuses on just one of Facebook’s tenets. Instagram’s Facebook integration just needs a little more tweaking and it would work very well. Keeping Instagram communicating with Twitter and Flickr will prevent alienating users.
An excerpt from the soon to be released Let’s Pretend This Never Happened ( A Mostly True Memoir):
As of today I’ve had to ask five separate men, “Is this your penis?” after their pictures got caught in the e-mail filter. (Side note: When I read this to people who don’t work in HR, they stop me here and say, “Really? People actually mail pictures of their penises at work?” And I explain that yes, it happens at least once a quarter. If it’s an HR person I’m read ing this to, they always say, “Really? You worked in HR for fifteen years and you only had to ask five men about their penises?” And I explain that no, I wrote this in my first few years in HR, and there’s another one in the very next paragraph. After that they just got so commonplace I stopped writing about them in my journal. I eventually got to where I could say, “Is this your penis?” without blushing or giggling. That’s how much practice I had at handing random men photos of their junk and asking them to identify their penis. I never once had to do it with a vagina. Probably because women are better at not getting their e-mails caught in the firewall, because they don’t use the subject line “Look at my penis.” Also, vaginas seem to have less personality than penises, so “Is this your vagina?” would probably be difficult to answer. If someone asked me to pick out my own vagina’s mug shot out of a lineup of vaginas, I’d be helpless. And probably concerned about what exactly my vagina had been doing that constituted a need for its own mug shot.
Yet another reason I don’t think I’d ever want to work in HR.
Interesting post by Good on the presence of Cocaine in Coca-Cola. Spoiler: there’s no cocaine, but it does involve the use of coca leaves and special exceptions by the US government.
In order for Coca-Cola to continue to exist in its current form, the company has a special arrangement with the Drug Enforcement Administration, allowing it to import dried coca leaves from Peru (and to a lesser degree, from Bolivia) in huge quantities. The dried coca leaves make their way to a processing plant in Maywood, New Jersey, operated by the Stepan Corporation, a publicly traded chemicals company. The Stepan factory imports roughly 100 metric tons of the leaves each year, stripping the active ingredient—the cocaine—from them. The cocaine-free leaves are then shipped off to Coke to turn into syrup, and, ultimately, soda.
Go read the article, it’s interesting.