Exploring Facebook Strategy Options

I am going to start with the most popular tech company these days. It's ofcourse Facebook. People have started crying hollow as whether the firm is worth its $100 Billion+ valuation at IPO stage.

Starting with its strategy, it is simple. Facebook wants to be the dominant exchange of information amongst its users' personal friends/ circles. This is a prominent strategy used by all players including eBay and Yellow pages. Essentially, if all your friends are on the soccer field, what are you doing on the basketball courts? Facebook has beaten the competition since it focused on keeping all eyeballs at one place.

How is it trying to make money? It is trying that by providing a word of mouth marketing experience (Tupperware, any one?). Essentially, it is telling its advertisers, that Facebook allows people to have a word of mouth referral of their products and services. How do I, as a marketer, control that?

This brings up the first problem I have. So, if I am a smart marketer, I could set up a pyramid scheme, where I start recruiting people to sell/promote my products through this online referral scheme. Personally speaking, If I get even a hint of such a possibility in my own circle of friends, I  know it will turn a lot of people off. Luckily, people can be "un-friended". This could destroy the whole ecosystem.

Another, less obvious way could be some of my friends becoming paid lifestyle actors on FB. In every group of friends, there is one who everyone looked up to and envied by everyone for their looks, style, clothes, money and personality. An interesting movie few years ago, "Keeping Up with the Joneses", starring David Duchovny and Demi Moore - showed this actor couple who move into neighbourhoods and with their style and flash, get the entire neighbourhood splurging on  stuff they don't need. One could sense, that lifestyle companies could recruit such folks and market products from friends. This will be difficult to catch and control.

Still, establishing a dominant exchange is the easy part. Now, how does Facebook ensure that it gets a system lockin. This is where Facebook needs to differ. While Google and Yahoo before that, tried to be the Total Solution providers (providing email, finance, news, and the like), Facebook is trying a more mature experience.

It is trying to build an ecosystem of content providers that can be inserted into this referral business. For example, if I read an article on WSJ or Economist, that I liked, I could insert that into my thread, making it part of all updates that my friends receive. Important thing would be to ensure that it does not switch people off. Already, Yahoo may be benefitting from such an arrangement as it is probably the biggest content organization on the web (leaving aside the original WSJ or NYTimes equivalents).

But, online content providers are not known to make money as well. Most of them have resorted to a subscription model. Now, Facebook did try to launch that subscription model, in New Zealand. To me, now a direct payment model makes more sense than advertising, but there are smarter ways to go about it.

A much better opportunity would be that Facebook tie up with Mobile companies to say that since they direct 15 to 20% of the mobile web traffic, the mobile provider should share 1% of monthly data charges with Facebook. I am pretty fine, my mobile provider passing some of the money I give them to send to facebook. Not sure what is the right way for FB to start this conversation, but never hurts to ask.

Another, important partner could be Amazon. I use Amazon quite a lot to send gifts/ books to family and friends, all of them, as you guessed are on Facebook. If FB and Amazon do a tie up, they will make money, as FB could remind me that such and such person's birthday was coming up, while I send the gift via Amazon. Amazon could share some referral business with Facebook.

Bottomline, I can see the difficulty in opening FB flood gates to marketing and advertising folks who could infact kill the whole Facebook experience. In my next post.... we will see how FB is trying to prevent the system from weaknesses and trying to come up with a monetization strategy as part of the site architecture (only if I am able to find the information).

Strategy is everything

A few days ago, I started this blog on Architecture and Investment. It has slowly dawned on me that strategy is the starting point for architecture. If the architecture supports the strategy, the organization can better meet its targets. If not, it will struggle to operationalize its strategy.

Also, by architecture, I mean the enterprise architecture, which includes business architecture, information architecture, technology architecture, product architecture and so on.....

A Strategic exercise typically starts by segmenting the marketplace to understand the motivations and buying criteria for different segments. Once this is established, the first item of business is to decide which segments to focus on.

An Architecture is then developed to ensure that the focus can be translated to a business and a technology form that can perform and provide leverage in operations, differentiation, pricing and even market positioning.

What is working and what is not, can ofcourse be eventually measured through the financial documents published by an organization.

This is the underlying theme that I will try to explore within this blog. 

Introduction to ArchInvest

This is a new blog I am starting on. My objective of this blog is to look at technology investments that I am contemplating from the view of the product/platform software architecture and design.

I have tried to establish the argument further, in successive posts. Important among these are

1. Strategy is Everything

2. Why is Architecture important for Strategy and how does it impact how good a technology firm is as an investment?

and,

3. Measuring Architecture for Investment

At this point, I am not sure if I will find such a correlation, and this is very much a journey in progress, however, no harm in trying..... Happy reading!