Ecommerce could be Facebook’s next big business … if it addresses a few things

March 9, 2011 § 2 Comments

Much hoopla has been made about Facebook’s ecommerce opportunity.  Just as it has quickly earned a strong position in display advertising, and has grabbed share in virtual goods and payments, the industry pundits now say that online commerce will be its next billion dollar business.  The tools already exist, in fact, for merchants to integrate commerce directly into their Fan Pages, obviating the need for customers to link out to conduct their business.

But I think Facebook, and the merchants who sit atop its platform, are going to have to go beyond a “build it and they will come” approach, if they expect to reap the full potential of this new revenue stream.  I recently conducted an informal poll to gather insight on people’s attitudes and intent when it comes to Facebook commerce.  While there’s all sorts of caveats here, ranging from small sample size to survey bias, I think the findings are directionally useful – absolutely no one had the desire to buy traditional goods or services from within a Facebook page.  The rationale varied, but tended to fall into two themes: distrust and value.

Thanks in part to continuous headlines accusing Facebook of privacy violations (or of making it difficult for users to control their privacy settings), many people, it seems, are hesitant to relinquish any further data to the service.  And purchase decisions can be as revealing and personal, if not more so, than just about any other category.  Others simply don’t appreciate the value of buying through Facebook.  Some even assume that the inventory and buying experience will be a slimmed down version of what’s available on the merchant’s own site.  Facebook’s ecommerce strategy, therefore, should seek to resolve these barriers.  For example:

  • They should strengthen their online privacy policies.  A tall order, perhaps, for a data-oriented business model, but low hanging fruit include simplifying privacy controls, and being more sensitive to how its constituencies will react when it considers new features with questionable protections.  Remember Beacon, and the poor guy whose engagement ring purchase was revealed to his soon to be fiancé prior to the proposal?
  • Merchants would be advised to offer a comparable (if not unique) selection within Facebook.  If strategy or availability dictates otherwise, go deep on the specific categories that are offered there.
  • Product reviews and brand suggestions could be more personalized within Facebook (as compared to outside of it) if users opted-in to a higher level of disclosure.  For instance, Facebook could give buyers the option to share a purchase with their network anonymously or in the aggregate on external pages, and openly within Facebook pages.  So if you were shopping for the Motorola Xoom on Amazon.com, you might see that 15 of your friends “Like” the item or even purchased it, but if you shopped for the same gadget within Facebook, you could see specifically who those friends are, whether they posted any feedback, and so on.  Today, there’s no such distinction.
  • There’s no denying that credit cards are a suboptimal payment method for ecommerce, and even if you keep your card on file with multiple merchants, managing all those logins and passwords is a major pain.  Facebook’s payments platform, originally implemented to take a bite out of the virtual goods market, will be expanded to make real world purchases a whole lot easier.  Think PayPal for Facebook.
  • Facebook will ultimately host thousands (millions?) of commerce pages, likely positioning it as the broadest “store” on the Web.  As an aggregator, it could structure a rewards program with greater benefit than what’s offered by sellers individually.  Tied to its payment platform, points could be redeemed across its participating merchants, both physical and virtual.  It could also choose to award status and privileges to users who make purchases within its pages.  Facebook has done little to date with status awards, but history shows (recall Yahoo! Answers) that they can be extremely motivating.

Ecommerce could be a big deal for Facebook, and in fact, may be necessary to justify its massive valuation.  But to reach its potential, it should address its privacy issues, and seek to offer advantages over merchants’ own sites.

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Winning the war for talent takes thinking like a marketer

March 1, 2011 § 1 Comment

How nice it would be to have the allure of Facebook or Twitter.  If you’re these guys, you get job applications by the truckload whether you’re looking for talent or not.  Armed with universally loved services, plenty of media buzz, fresh rounds of capital, and rapidly appreciating stock valuations, you can easily offer what most employees want – to the detriment of everyone else looking to hire.  Despite overall anemic economic growth, in the technology arena the war for talent is in full swing.  Facebook is reportedly doubling its workforce of 1,500 this year, Groupon is quickly building upon its 3,000 employees to drive expansion into new markets, and Zynga is adding staff to studios in major cities across the U.S. and abroad.  These high profile players, and others like them, are gobbling up top notch engineering and product talent seemingly at will, and putting pressure on the rest of the industry to compete, not just for consumers and capital, but for people.  Even industry stalwarts like Microsoft and Google aren’t immune.  Consider some of the evidence: 

  • The average annual salary for software engineers is $89K in the U.S. overall; it’s $106K in Silicon Valley.
  • Zynga has been said to offer still wet-behind-the-ears engineers up to $150K in salary and bonus.
  • Yahoo! has been bleeding talent for a couple years now.
  • Late last year, Google bumped employee salaries 10% across the board to better compete with offers from Facebook and Twitter (although they have denied the raises were in response to any company in particular); start-up Tagged has just done the same.
  • With multi-billion dollar valuations again possible, equity packages have become a primary draw

If Google is struggling to keep its edge, how do the rest of us stand a chance?  If you were thinking like a marketer, you’d realize that yours is a positioning problem, not a compensation or even an stock valuation one.  Marketers know instinctively that they cannot be all things to all people, and to go head-to-head with a better equipped competitor is a Kamikaze mission.  To the contrary, marketers understand the iterative process of matching what a target market prefers with the unique offering you specifically bring to the table.  Your company’s Employee Value Proposition (EVP) is its blend of tangible and intangible attributes that it can deliver better than most (if not all) others.  Once you recognize this, to target job candidates who seek something different is a waste of time.  But if you know your strengths relative to your competitors, you can seek out employees for whom your differentiation resonates.  Let’s take a look at how this idea could play out against many of the attributes that make up an EVP:

  • Base pay: Unless you have the cache’ of a hot growth company, you need to be paying market rates, if not higher.  There are premium services that do the benchmarking for you, but if you’re bootstrapping it, I recommend that you take a look at Salary.com.
  • Performance pay: Whether you offer this to everyone, and to what degree, is a matter of your comp strategy and economics, but keep in mind that it can be a differentiator for you; and lower risk when only paid out in exchange for high quality work.
  • Stock/Options: If you want your employees to behave like owners, then you need to pay them as such.  But be realistic.  If a candidate is choosing between you and Quora, you’re not going to outgun your competition on equity alone.  If this is the primary decision factor for the candidate, you may have to fork over a larger share, or concede and move on.
  • Perks: The media likes to celebrate perks such as free meals, snacks, on-call massages and laundry service, and for many people, these benefits have become table stakes.  But for others, they are relatively unimportant.  Know your audience.
  • Culture: People want to work for a company whose culture reflects their own values.  Glass tower vs. Soho loft?  Code-till-you-drop vs. time for family?  Buttoned-up vs. casual?  Where you fall on these scales shouldn’t be random, or merely a reflection of the founders’ management style; it should represent a strategic decision you make about the environment that will best set you up for success with hiring, keeping, and motivating employees.  And although it’s fun to talk about hacker environments that survive on pizza, Mountain Dew, and foosball, in reality they aren’t for everyone.
  • Location: Not every company can (or should) be based in the Valley or New York, and so right away, you can better compete by keeping your literal distance from strong players.  Some players will specifically choose NOT to be based in the Valley so as to avoid direct competition and potentially overpaying for talent.  Others will base themselves in larger talent markets, but perhaps on the geographic fringe.  There’s two sides to this approach, of course, but it’s a factor that every technology leader must determine.
  • Leadership: Speaking of leaders, people want to work for those they respect and trust.  If your leaders are charismatic and visionary, then use them as a hiring weapon.  Have them publish, put them out in front of trade groups, and make them part of your recruiting plan.  If they are not the kind of people who represent the company well, then hiring is only one of your many challenges.
  • Team: Some people prefer the structure that comes with a larger business and others despise the bureaucracy.  Don’t paddle upstream on this – leverage what  you have.  Or, if consistent with your organizational strategy, you may choose to consolidate or specialize teams to better appeal to current and prospective employees.
  • Mission: Beyond making a decent living, most people want to make a difference, even if a small one.  Your company purpose doesn’t have to be altruistic, but should go beyond “maximizing shareholder value” (unless, perhaps, you work on Wall Street).  Not that they need the recruiting help, but the roles played by Twitter and Facebook during recent events in the Middle East have helped solidify their  importance as organizing and communication platforms that go well beyond the function of advertising.  And for some, will be the primary reason they choose to work there.   

All companies can be measured across these dimensions, but very few will look alike.  And therein lies the marketer’s edge – knowing that while you may be ill equipped to wage an all-out war with the hottest growth company in town, you will have distinct advantages that appeal to a set of candidates.  Synacor, a technology solutions provider to ISPs based in Buffalo, NY, is a great example of a company that’s playing the marketing and positioning game well.  As proud a city as Buffalo must be, it’s got to be hard to sell outsiders on the concept of a smaller town with bitter cold winters.  But check out the career section on their site, and you’ll find a company that knows who it is and what it has to offer.  Like Synacor, know your strengths and who values them, and you’ll be well on your way to securing the talent you desire.

In addition to honing your EVP, you also need to cultivate and promote your reputation.  If your company isn’t a Fortune 1000, or isn’t getting much love from TechCrunch, Engadget or Mashable, you’d better find alternative channels with which to get the word out.  I’ve already touched on leadership exposure.  You should also post and actively manage a Facebook Fan Page, LinkedIn profile, and company blog.  And even if TechCrunch isn’t within your grasp, a well rounded PR and sponsorship strategy should still be.  Of course, the best thing you can do for your reputation may be to treat your people – whether they’re on their way in or out — like the important assets they truly are.  Make them ambassadors for your business, and you’ve compounded your recruiting muscle.  Sour them, and your reputation is DOA.  Don’t believe me?  Check out the employee reviews on TheVault.com.

Winning the war for talent is not unlike winning market share – focus on what you do well, and don’t try to be all things to all people.  You’ll not only have an easier time securing talent, but also keeping the good talent you already have.

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