Investing, a topic for virtually everyone. "Investing" is a term that applies to many walks of life. Examples include: Investing in one's future via gaining a degree or further education, investing in stocks, bonds, mutual funds, or even investing in a potentially life-changing relationship. Essentially, time is the constant in most everything, and this is certainly true with the term "investing". A great (and near and dear) example is the time you have invested to reading this blog post. You came to learn, escape, or achieve a different view on innovation that is not consistent with the norm of thinking. If it's your first go at this blog, welcome, if it isn't, you should love where I am taking this post.
What is fun about this post is the direction I can take it. Because of the vast opportunities in front of me, let me narrow the scope a touch. Let me zoom in on the finance-related view of investing, which touches millions of 401k's, college-savings accounts, and the majority of Main Street America's value, less real estate. Ahh, the stock market.
Traditional investments in equities will tell you that anyone can research a company's financial statements, predict/model future earnings, and thus, arrive at a valuation of stock price. If your valuation is lower than the current stock price, you are propelled to buy. If it's the contrary, you hold a short position; if and only if you hold a margin account with your brokerage firm.
Is there a flaw here? ... that sir/madam would be a resounding YES!!!
But Steven, investing in the stock market has a distinguished history, dating back to 12th century France, how could you possibly find innovation in something so old, established.
That stance is precisely from those that are not thinkers, innovators. Those that don't challenge what is working, has been done, or has been tried in the past. Just because something has been operating for years, if not hundreds of years, doesn't mean it is the most efficient it can be. It doesn't mean there isn't innovation abound. Think about it this way, the human spirit will always prevail, such that no matter how incredible you make a process, market, or company, the next person will be challenged to improve upon the existing being, and will always succeed. That's what makes human existence amazing. We keep growing.
Back to the stock market and investing. Where is the innovation? Simple, it's in the way we value companies and the underlying stock price that dictates the market values of said companies. Far too often, if not always, students of high finance take the equations fed to them in college and apply such academic equations to real-world situations. What's wrong here is equations typically do not factor in experience. Now, before you start showing concern about experience happening over time in one's career, that's not where I am heading. Experience in this instance is a matter of market experience; where the consumer's mindset is via their employer, friends, and competing products/services.
As a result, experience isn't something that requires a 20-year vet of investing in the stock market. In most cases, such experience may hinder response by not being reactive enough to change. Experience here is taking time to adjust to market conditions. I see a circular reference coming up, so let me counter by explaining the following:
Every quarter or year-end, analysts at major firms are surveyed by Factset for the stocks being followed such that the survey responses allow Factset to report the average earnings estimates. If the company comes in below "estimates" the stock tends to drag, and if it's above "estimates" it tends to gain, with respect to other major market announcements such as industry trends, employment data, or other leading indicators.
Innovation? Well, it's in the valuation of companies. I think, we all too often look at future cash flows, complete NPV analyses, and trade via the like. Unfortunately, the NPV doesn't always consider the innovation that may occur within a company. I'm not going to focus on a poster-child example, but I will say, that the equations of future valuation are EXTREMELY flawed.
If the following is an example of predicting valuation (dividend used):
Price = ∑ (Dt / (1 + r)t)
...where D equals the dividend and "r" equals your required rate of return for the period (t).
Given a static dividend, the flaw exists in the "r", the return on capital you expect from the folks running the internal capital investments. Because the "return" fluctuates greatly among stocks you are reviewing, good luck gauging success or failure in your investments. This disparity is definitely true in situations when you don't have visibility into the inner-workings of a company and are reliant on public data.
Plus, and only to complicate the pricing of securities, is that this information is published quarterly, as a result, what could be causing fluctuation in pricing between announcements but market pressures? Haven't you wondered what drives pricing changes between announcements?
Anyway, let's give it a go with this new, never used/finally published equation (you'll love how I leveraged existing findings lest boiling the ocean)
Price = ∑ (Dt / (1 + r)t) * P
This equations gives you a bullish/bearish view of the industry/market. "P" then equals the variable you place on the stock. A variable below "1" gives you a bearish view, and a variable above "1" gives you a bullish view. I recommend not exceeding 0/2, as your outlook shouldn't extend beyond the next quarter of earnings/data release. Also, you should re-assess your factor per competitor's releases post leading-industry players releases. The constant, and consistent valuation of a company will give you an up-to-the-mintue understanding if you are adding value for yourself or someone else.
Valuing P is the challenge then, and this is precisely what I want to do with this post. Unfortunately, I can't provide a table suggesting valuation per industry as timing and markets fluctuate so rapidly, but what I can showcase a framework I recommend to value "P".
When will innovation be seen? (Weighted value - 0.7)
R&D can be a multi-decade process or deliver something with a very short go-to-market strategy. Understand from management what the company is working on and when the benefits will be reflected in the earnings. What you are looking for here is short turnarounds on investments made by the company. If they are going after huge losses that will take years to recover, that will hurt earnings. If they are taking on low hanging fruit or landing large item innovations that are immediately profitable, make sure these are going to be seen in earnings within a year. Beware of management teams that keep talking about innovations but never seem to deliver.
How will the company respond to market changes? (Weighted value - 0.5)
Can senior management give you a vague but directed enough answer to the question "what are you in the business of doing?". If management of an automaker says "we make cars." run for the hills. If management answers the same question with, "we provide transportation options to our customers." then hop on board. The more narrow the focus, the more narrow the mindset/culture of the company, and the less likely the company will quickly shift into new technology or solutions, leaving it open to a swift death.
What will happen tomorrow? (Weighted value - 0.3)
Bring the market into play here. What other earnings are being released? Competitors, like-industries, suppliers, customers, economic data, are all points to consider. Consider this a temperature check on the market place and decide a value that reflects a market confidence level. Market pressures are enough to change a stocks price with or without a company announcement.
Who will be running the show? (Weighted value - 0.2)
Leadership change is just that, change. Some times the market reacts positively, but also negatively. Gauge what you think the response would be and place a value on it.
Where will the company be in one year? (Weighted value - 0.3)
Bring everything together and value the company. Don't just average the above items, but give the number a gut check and stick with it.
Add up your values, multiply this in the Price equation and compare to the current market price. Happy hunting.
-Steven Janke
Tuesday, November 5, 2013
Friday, April 12, 2013
Content
Content, there's a lot of it about. Sifting through everything that is "content" is quite the daunting undertaking. And not just sifting for sifting's sake, but sifting and comprehending the value of the content.
Up until the advent of the Internet, content was primarily physical. Sure, databases began storing content via IBM products in the 1940's, but everything in these databases leading up to the Internet was mostly business-related data, hence the company was aptly named - International Business Machines. Other content before the Internet then was printed, painted, pressed, or simply "known".
Indexing helps to sift through the existing content, allowing searching for keywords to drag out responses that hold similar content. However, there is a very large problem with this functionality. Indexing doesn't return "the most valuable content", it only provides content that will (1) likely cover what you are searching for due to shared terms, (2) open itself up for misinterpreting what you meant in your search, and (3) give you a shitload more content that would take years if not millennia to search through. Imagine that, searching through the content that was derived from a previous search attempt.
Google, for example, is a platform that employs spiders to continuously seek out, understand, and index content available on the World Wide Web. However, the simple experiment of a keyword search for "baseball" retrieves a response of about 549,000,000 results. While these results only took 0.73 seconds to generate, it's still 549,000,000 results. If you considered each result, every second, it would take about 17.5 years to look at every single result. Naturally in this scenario, within the first few minutes of looking you would have a fair understanding of the term "baseball", but what are you really looking to understand? Was the search term "baseball" valuable to begin with? Did the search provide the results that got to the question or insight you approached the search function to understand? Did you get beyond even the third page of results before finding what you wanted to know? How can we fix it such that your first search will always give you exactly what you are looking for? The goal is to make it so you do not need to look any further, to consider a daunting number of results, and to remove the sense of data overload.
The powerful tool of indexing then isn't the problem, the problem is in how we "talk" to computers.
I propose a new functionality in which we may communicate with computers. Start with a term, and have the computer ask a tree of questions to further narrow down its umpteen-to-the-tenth number of results. Via this process, the computer "works" with the user to best determine the source, data, and knowledge the user is seeking. This conversation is possible. We have the technology. I've seen it in action with the 20Q game in which you think of something, and the computer asks a series of questions to ultimately zoom in on what you thought of, doing so within just 20, and sometimes far less, questions. It's quite remarkable, check it out.
For some questions in our new search functionality, however, I imagine the path of questions to answers would be rather short, where some may be rather long. Additionally, given attention spans of us humans, I'd recommend targeting nothing greater than 5 questions.
Outside of the 20Q game, in practice we see similar questioning by doctors when deciphering a patient's symptoms. The well taught tree of questioning might look like this:
- How long have you had this problem?
- Have you experienced changes over time?
- Do you have any idea what may trigger changes in symptoms?
- Do you have family history with this aliment?
- etc.
This entire line of questioning is meant to develop context, to cancel out known issues and to focus in on those that remain suspect. After which, the doctor is potentially in a better position to run targeted diagnostic testing, which would have otherwise been shots in the dark without the line of questions. Computers can be trained to do just this for any topic, and much easier still with the advent of machine learning such that trends in search requests would make it all the more easier for computers to quickly react to responses received by other users.
A product then, for example, could be Google Converse. With the power of Google search engines interacting with users within a defined set of questions and incremental searches on the previously generated responses, and layering on any trending content, would be a leap forward in the engagement users have with the Internet, the company, and the content.
-Steven Janke
Up until the advent of the Internet, content was primarily physical. Sure, databases began storing content via IBM products in the 1940's, but everything in these databases leading up to the Internet was mostly business-related data, hence the company was aptly named - International Business Machines. Other content before the Internet then was printed, painted, pressed, or simply "known".
Indexing helps to sift through the existing content, allowing searching for keywords to drag out responses that hold similar content. However, there is a very large problem with this functionality. Indexing doesn't return "the most valuable content", it only provides content that will (1) likely cover what you are searching for due to shared terms, (2) open itself up for misinterpreting what you meant in your search, and (3) give you a shitload more content that would take years if not millennia to search through. Imagine that, searching through the content that was derived from a previous search attempt.
Google, for example, is a platform that employs spiders to continuously seek out, understand, and index content available on the World Wide Web. However, the simple experiment of a keyword search for "baseball" retrieves a response of about 549,000,000 results. While these results only took 0.73 seconds to generate, it's still 549,000,000 results. If you considered each result, every second, it would take about 17.5 years to look at every single result. Naturally in this scenario, within the first few minutes of looking you would have a fair understanding of the term "baseball", but what are you really looking to understand? Was the search term "baseball" valuable to begin with? Did the search provide the results that got to the question or insight you approached the search function to understand? Did you get beyond even the third page of results before finding what you wanted to know? How can we fix it such that your first search will always give you exactly what you are looking for? The goal is to make it so you do not need to look any further, to consider a daunting number of results, and to remove the sense of data overload.
The powerful tool of indexing then isn't the problem, the problem is in how we "talk" to computers.
I propose a new functionality in which we may communicate with computers. Start with a term, and have the computer ask a tree of questions to further narrow down its umpteen-to-the-tenth number of results. Via this process, the computer "works" with the user to best determine the source, data, and knowledge the user is seeking. This conversation is possible. We have the technology. I've seen it in action with the 20Q game in which you think of something, and the computer asks a series of questions to ultimately zoom in on what you thought of, doing so within just 20, and sometimes far less, questions. It's quite remarkable, check it out.
For some questions in our new search functionality, however, I imagine the path of questions to answers would be rather short, where some may be rather long. Additionally, given attention spans of us humans, I'd recommend targeting nothing greater than 5 questions.
Outside of the 20Q game, in practice we see similar questioning by doctors when deciphering a patient's symptoms. The well taught tree of questioning might look like this:
- How long have you had this problem?
- Have you experienced changes over time?
- Do you have any idea what may trigger changes in symptoms?
- Do you have family history with this aliment?
- etc.
This entire line of questioning is meant to develop context, to cancel out known issues and to focus in on those that remain suspect. After which, the doctor is potentially in a better position to run targeted diagnostic testing, which would have otherwise been shots in the dark without the line of questions. Computers can be trained to do just this for any topic, and much easier still with the advent of machine learning such that trends in search requests would make it all the more easier for computers to quickly react to responses received by other users.
A product then, for example, could be Google Converse. With the power of Google search engines interacting with users within a defined set of questions and incremental searches on the previously generated responses, and layering on any trending content, would be a leap forward in the engagement users have with the Internet, the company, and the content.
-Steven Janke
Friday, March 8, 2013
Hair today, gone tomorrow
Funny title, I know. A play on words of "here today, gone tomorrow". A different word in place of the word "here", yet sounding similar, brings the astute listener to balk, giggle, or laugh at you for your dumb grin as you attempt to bask in your self-made glow of whatever brilliance you think the pun may have created for you. Nevertheless, there is meaning here. There is innovation here in the phrase "here today, gone tomorrow". Think about it.
---
I take it you didn't think about it. Give it a go.
---
Again, you didn't think about it, even after I told you to think about it. Fine, if not for me, do it for yourself; think about the phrase "here today, gone tomorrow" and decide where the innovation enters into the construct of this blog.
---
That was a test. Did you pass? Did you pass in the light in which you want to be perceived by others? It's simple. If you actually spent time thinking about it, you are intuitive, curious, and likely, innovative. You challenge what you know. You challenge what others know. And most importantly, you challenge and try to change the "way things have always been done."
If you didn't take time to think about it you are either lazy, feeling lazy today, reading strictly for entertainment, or simply found this blog on accident.
Consistent readers of this blog should have an inkling as to where I am going with this. New readers will likely think that I have an idea that will knock Rogaine or hair restoration treatment out of the park. Super new readers will likely think I have an idea about laser hair removal. Ahh, but the long-term, extended reader will see through all of that. There is a bigger picture here, because sometimes a title is just a title.
The big picture: Innovation. Where does innovation come from? There is only one answer. A simple, one word answer. Psychologists got together a long time ago and tried to come up with a word to describe it. They succeeded in landing on the word "cognition". This word essentially means thought, the process of thought, mental action.
Cognition is the driver of innovation. Without our ancestors being able to employ cognitive thought they would have never developed language, civilization, or life as we know it today. The fun is that everyone can experience (albeit at varying levels) cognition.
So Steven, why are we talking about this in your blog?
Because I am simply amazed at our abilities to continually press forward, to never be satisfied with what we have, know, or are developing. We are in a constant state of progress. Some progress when viewed at the project level probably isn't as economical when compared to other projects, but it's progress.
Sadly, there are limitations. Unfortunately, not every bit of knowledge is pass on to the next generation. Knowledge, and better still an understanding of how to react in certain situations per leaning on past experience is cause for growing pains that the future generations need to go through. Some say growing pains is how the future generation learns such that they become perceived as being more learned, more experienced than the next. Historically sure, but not so much for this blogger in the age of information.
A great author once wrote in a book, The Kykuit Bunker, in presenting a character that happens to be the curator of the Rare Books and Special Collection at the United States Library of Congress:
“I believe this library is one of the greatest resources available to mankind. The information we have within these walls is truly the human record, what little piece of it we as human beings have been able to create, collect, and preserve.” The curator was speaking with immense pride for being a part of such a grand effort, and for being in the prestigious position he held.
---
I take it you didn't think about it. Give it a go.
---
Again, you didn't think about it, even after I told you to think about it. Fine, if not for me, do it for yourself; think about the phrase "here today, gone tomorrow" and decide where the innovation enters into the construct of this blog.
---
That was a test. Did you pass? Did you pass in the light in which you want to be perceived by others? It's simple. If you actually spent time thinking about it, you are intuitive, curious, and likely, innovative. You challenge what you know. You challenge what others know. And most importantly, you challenge and try to change the "way things have always been done."
If you didn't take time to think about it you are either lazy, feeling lazy today, reading strictly for entertainment, or simply found this blog on accident.
Consistent readers of this blog should have an inkling as to where I am going with this. New readers will likely think that I have an idea that will knock Rogaine or hair restoration treatment out of the park. Super new readers will likely think I have an idea about laser hair removal. Ahh, but the long-term, extended reader will see through all of that. There is a bigger picture here, because sometimes a title is just a title.
The big picture: Innovation. Where does innovation come from? There is only one answer. A simple, one word answer. Psychologists got together a long time ago and tried to come up with a word to describe it. They succeeded in landing on the word "cognition". This word essentially means thought, the process of thought, mental action.
Cognition is the driver of innovation. Without our ancestors being able to employ cognitive thought they would have never developed language, civilization, or life as we know it today. The fun is that everyone can experience (albeit at varying levels) cognition.
So Steven, why are we talking about this in your blog?
Because I am simply amazed at our abilities to continually press forward, to never be satisfied with what we have, know, or are developing. We are in a constant state of progress. Some progress when viewed at the project level probably isn't as economical when compared to other projects, but it's progress.
Sadly, there are limitations. Unfortunately, not every bit of knowledge is pass on to the next generation. Knowledge, and better still an understanding of how to react in certain situations per leaning on past experience is cause for growing pains that the future generations need to go through. Some say growing pains is how the future generation learns such that they become perceived as being more learned, more experienced than the next. Historically sure, but not so much for this blogger in the age of information.
A great author once wrote in a book, The Kykuit Bunker, in presenting a character that happens to be the curator of the Rare Books and Special Collection at the United States Library of Congress:
“I believe this library is one of the greatest resources available to mankind. The information we have within these walls is truly the human record, what little piece of it we as human beings have been able to create, collect, and preserve.” The curator was speaking with immense pride for being a part of such a grand effort, and for being in the prestigious position he held.
What if, we as humans could fully share our knowledge and thoughts while having others learn, comprehend, and recall everything we transmitted? Nothing would be lost. Past growing pains would subside. An appreciation of knowledge would be global and universal.
As a result, I propose something greater than Wikipedia. We need a download and save function of cognitive thought. A record of everything and an efficient method of searching through it. The World Wide Web isn't it, not now anyway. I am confident that some day, the neuron connections that are sparked every day, which build a frame of reference from which you can make decisions, will become holistic, omniscient, and awesomely powerful.
Until then, make sure you read this last paragraph twice.
The uber depressing part about this post is inevitability: we all won't be here tomorrow. What's here today, is truly gone tomorrow. Share yourself for you never know when "tomorrow" will turn into your "gone tomorrow". Be the person that challenges. Be the developer. Be innovative.
-Steven Janke
Monday, March 4, 2013
Packaging of Bottled Consumables
If you see a warning on a package, most likely the producer has previously been sued for the very thing you are being warned about. Companies can spend millions of dollars and hours upon hours researching a product, only to put it on the market then get sued for unforeseeable misuse or damages. The result of these lawsuits is a need by the company to protect itself from future lawsuits, or exit the market place entirely. Typically, in an attempt to recoup the costs of development, the company does not sunset a product and simply places a warning label on the packaging and product itself. In some instances, the federal government has stepped in with legislation to protect consumers.
One example of well-placed government intervention is on the pharmaceutical industry in the packaging of drugs. Such legislation requiring tamper-proof packaging and labeling meant to protect the consumer was a result of a horrific event in 1982 in Chicago involving Tylenol. Thirty plus years ago, bottles did not have the protective wrap around the lid, nor the layer of protective paper/foil at the top of the opened bottle. As a result, it was simply for passer-bys to open a bottle, put something else in it, put it back on the shelf, and the next consumer to come along would be subject to whatever was previously placed there.
Fortunately, the tampering of such products is now a federal crime, manufacturers have since complied with the laws surrounding the tamper-proofing of products, and consumers have been trained to only purchase such items if these seals remain intact. So what is the innovation thought I have? Let me tell you.
My trouble is with the memory span of consumers and companies. I can be certain that many people will never forget what happened in Chicago in 1982. I can tell you that the companies will continue to follow the laws in which they produce their products under. But what I can't be sure of is the ability for every consumer to be cognizant of the dangers of buying a previously tampered with product. As a result, I think companies need to be innovative in finding ways to re-train consumers on what to look for when buying consumables.
A good example is the bottle of Listerine I have sitting on my desk for the purpose of detailing this innovation really well. The bottle has a cap on it, and a cellophane wrapper around the cap. The wrapper has writing on it "Listerine, #1 Dentist Recommended Brand," a writ that continues in a pattern that surrounds the entire wrapper. As I remove this wrapper, I find once I get the cap off, I have immediate access to the product. There is no additional seal. So the one thing that is keeping this product secure is the wrapper. Sufficient? Let's hold that question for a second.
I pause to go back to the warning labels I previously mentioned. Are there warning labels readily available to me? Ah, found one. On the front label, bottom left corner, in call it 7 point font, I find "Do not use if printed Listerine(R) band around cap is broken or missing". Ok, now we are getting somewhere. Listerine is indicating that ever if there is a slight tear in the wrapper, don't use this product because guess what, there isn't a second layer of protection for you.
Let's look to the back label. Marketing about killing germs on contact, points about benefits of use, drug facts, warnings about not allowing children under age of 12 usage and contact poison control center if swallowed, directions of use and storage, inactive ingredients, directions of opening the bottle, ADA endorsement, address, UPC, .... But nothing about the safety of the package. So the ONLY place on this bottle that recommends denying use of this product per any sort of training around being cognizant of the threat of tampering is solely and squarely focused on the oft forgotten, small type on the front of the bottle.
I did a quick walk down the aisle of the Rx section the other day and I really think we can do better with our packaging. Because I like marketing, and don't want to be perceived entirely negatively, the challenged I posed for myself is to solve my concerns about product safety, consumer knowledge, and to generate a marketing opportunity. What did I come up with?
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I think Listerine, and pretty much any bottle-driven product, should adhere to a color-coded system of caps and wrapping. Imagine a bright yellow cap that has been wrapped with a blue cellophane wrapper. The resulting appearance is a green cap, indicating to the consumer a green light to purchase. Once the consumer has it as home, or wherever they plan to consume the product, they are comfortable in seeing the yellow cap and are confident they were a party to ensuring their safe use of the product.
The marketing comes in what companies write on the wrapper. Little phases about safety that only appear once the wrapper is removed comes to mind. Alternative cap colors from yellow to blue with the offsetting wrapper color to achieve a green color may assist in distinguishing products. Additionally, and probably more importantly for Listerine is the addition of another layer of protection. The Heinz Ketchup bottle has it right with a wrapper and foil lid on the bottle. So why doesn't Listerine? But on that second, tear-away foil lid, print something about safety, to comfort the consumer and to allow them to build more trust with your brand.
Saturday, February 23, 2013
Facebook Revenue Generation
Facebook is looking to generate greater revenues. Duh. A classic case for virtually every company. So how do you increase revenue? With a standard, basic, Business 101 product, you can increase volume or you can increase price, assuming the other factor of revenue (PxQ) remains constant, to increase revenue. As companies expand, age, and gain pressure from private investors or that of Wall Street, a regeneration of sorts occurs. Some companies respond with price changes. Others change effective quantity size to increase volume (which is essentially a price increase). Others buy companies to supplement or complement their core business, by praying their M&A activity doesn't incorporate such a large core adjacency disparity to turn off investors or at the very least distract from the core (hopefully cash cow) business. Others take a more expansive, expensive, and daring route; they innovate.
So the big deal here is, how does Facebook innovate? Facebook was nevertheless just a social network, portals that existed before, exist elsewhere on the Internet, and will continue to be created in perpetuity. What innovation remains? What tools are needed to create such innovation? Can this innovation, once public and user-ready, be imitated and improved upon by teenagers developing the "next best thing in their parents basement"?
Before focusing on the future by way of innovation, a company needs to look to its past. REvisit its founding. Get back to the core. Ask itself what it is in the business of doing. What customers it supports.... wait a second, customers. How else do you drive revenue? You need customers. Facebook gains most of its revenues based on eyeballs and traffic, which attracts advertising revenue in the digital space that was historically spent on different mediums. So, assuming the customer of ads is plateaued, how do you monetize individual users?
To tackle this last question, lets go back to the beginning: What was innovative of the initial launch?
The answer: Focus.
Focus played a huge role in the success of Facebook. Exclusivity. The need for an edu domain to register an account. And not just any edu domain. Harvard. Then other top schools, then most schools, then the expansion to any domain, leading to global prescene. But, it wasn't just exclusivity that drove users to the site. It was the clean layout, the "never crash" ideology, the intuitive interface (why the iPhone is so successful).
But back to focus. The core consumer was college-aged people. The typical 18-22 year old. Where are these folks now? What are they doing? What if Facebook was a success strictly because of this sliver of a generation that made it a success. What if Facebook were launched today, or in 1998, would it have been as successful. One can never tell, but one can be certain that small subset of the population drove usership via usage, word-of-mouth, and to mention it again, usage.
So, if Facebook were to revisit its core, think about this user group that led usage and drove popularity such that even uncle Larry wanted to join, then where are these folks now? what are they doing? and how can Facebook reach out to them again, and this time for receiving money directly from the user as opposed to attracting advertising dollars?
I think, this user group is now getting married and having kids. Some of them are even using Facebook to sign-up their babies. Yes, a baby has a Facebook profile. What is included in this profile? Pictures, videos, postings, and most importantly, stories about what happened on a particular day. Why is this special? Because it's a record of someone's life. So what can Facebook do about it? Partner with a printing company to have users develop Baby Books. They are able to take existing content that they already uploading and have it in printed, tangible form. Some may argue there isn't a lot of money there, but the idea itself has money in it.
And where is the money? From Baby Books comes the all important, yearbooks. Elementary school, junior high, senior high, and even some colleges/universities. What if Facebook went up against Jostens for yearbook revenue? I think Facebook would win. So long yearbook club. Now, with Facebook on the scene, the whole class gets to develop the yearbook. Individual student pictures are provided by each student via content already on Facebook. No more one time chance in the lunch room or gymnasium on picture day to have the perfect picture that will follow you forever. No more Seniors Only different pictures. The user controls it. But what does it also do? It engrains users into the highest of exist costs. Imagine, after one yearbook in 7th grade was user generated, trying to go back to the Jostens format of pictures with the same background and a hand full of students deciding the rest of the content. Good luck, the people will always want to contribute.
After all, isn't that the closest thing to Facebook's core? Being a picture book of friends, just online?
So the big deal here is, how does Facebook innovate? Facebook was nevertheless just a social network, portals that existed before, exist elsewhere on the Internet, and will continue to be created in perpetuity. What innovation remains? What tools are needed to create such innovation? Can this innovation, once public and user-ready, be imitated and improved upon by teenagers developing the "next best thing in their parents basement"?
Before focusing on the future by way of innovation, a company needs to look to its past. REvisit its founding. Get back to the core. Ask itself what it is in the business of doing. What customers it supports.... wait a second, customers. How else do you drive revenue? You need customers. Facebook gains most of its revenues based on eyeballs and traffic, which attracts advertising revenue in the digital space that was historically spent on different mediums. So, assuming the customer of ads is plateaued, how do you monetize individual users?
To tackle this last question, lets go back to the beginning: What was innovative of the initial launch?
The answer: Focus.
Focus played a huge role in the success of Facebook. Exclusivity. The need for an edu domain to register an account. And not just any edu domain. Harvard. Then other top schools, then most schools, then the expansion to any domain, leading to global prescene. But, it wasn't just exclusivity that drove users to the site. It was the clean layout, the "never crash" ideology, the intuitive interface (why the iPhone is so successful).
But back to focus. The core consumer was college-aged people. The typical 18-22 year old. Where are these folks now? What are they doing? What if Facebook was a success strictly because of this sliver of a generation that made it a success. What if Facebook were launched today, or in 1998, would it have been as successful. One can never tell, but one can be certain that small subset of the population drove usership via usage, word-of-mouth, and to mention it again, usage.
So, if Facebook were to revisit its core, think about this user group that led usage and drove popularity such that even uncle Larry wanted to join, then where are these folks now? what are they doing? and how can Facebook reach out to them again, and this time for receiving money directly from the user as opposed to attracting advertising dollars?
I think, this user group is now getting married and having kids. Some of them are even using Facebook to sign-up their babies. Yes, a baby has a Facebook profile. What is included in this profile? Pictures, videos, postings, and most importantly, stories about what happened on a particular day. Why is this special? Because it's a record of someone's life. So what can Facebook do about it? Partner with a printing company to have users develop Baby Books. They are able to take existing content that they already uploading and have it in printed, tangible form. Some may argue there isn't a lot of money there, but the idea itself has money in it.
And where is the money? From Baby Books comes the all important, yearbooks. Elementary school, junior high, senior high, and even some colleges/universities. What if Facebook went up against Jostens for yearbook revenue? I think Facebook would win. So long yearbook club. Now, with Facebook on the scene, the whole class gets to develop the yearbook. Individual student pictures are provided by each student via content already on Facebook. No more one time chance in the lunch room or gymnasium on picture day to have the perfect picture that will follow you forever. No more Seniors Only different pictures. The user controls it. But what does it also do? It engrains users into the highest of exist costs. Imagine, after one yearbook in 7th grade was user generated, trying to go back to the Jostens format of pictures with the same background and a hand full of students deciding the rest of the content. Good luck, the people will always want to contribute.
After all, isn't that the closest thing to Facebook's core? Being a picture book of friends, just online?
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