Last year, in May, I wrote about a dozen big trends and business model mash-ups. This was one of our more popular posts for the year, and I’ve had a lot on my mind since then. One aspect of blogging I love is that it puts you on record, which brings you back to some of your previous posts, as you’ll see below.
As an American, I often observe how we have a very short-term memory when it comes to the news. So I personally try hard to kick this habit and look into stories long after the short-term drama wears off. Then you really learn. It’s like reading the last chapter of a novel that ties it all together for you. So, with that in mind, I would like to share four things I’ve been thinking recently (and there are social commerce lessons in here too):
1. The rebound of the American car company
The WSJ had a fantastic opinion piece by Paul Ingrassia on Jan. 15th about this (tip: if you are not a subscriber to the WSJ, plug in the title of the article on Google and then click through and you’ll find the entire article). After near death, Ford and GM most recently posted net income of $6.4 billion and $4.8 billion, respectively, on much lower sales units. GM recently emerged from bankruptcy and pulled off a successful IPO; they had to shutter or sell many brands, including Pontiac, Mercury, Saturn, Hummer, Saab, Jaguar, and Range Rover.
In April of 2006, I wrote about General Motors consumer-generated ads and opened my post with the prediction that someday, people would recognize GM’s decision to put their brand in the hands of their customers as the reason for their turnaround. I was wrong – their turnaround came from big financial restructuring, forcing them to right-size. Or did it? Could it be that GM’s adoption of blogging, and therefore more transparency with themselves and customers, actually helped cause the sea change of behavior that they needed? Julian Assange certainly believes that transparency leads to better outcomes, although he goes about it in a very disruptive way (note: we knew Wikileaks would be a powerful movement and I first wrote about it in March of 2008, theorizing that it could radically transform governments). I know that blogging, and therefore going on the public record, causes a behavior change. It is human nature. And if you read GM’s blog posts from their darkest hours, you will see what I mean. Yes, they were transparent. And I believe this helped them bring about the change they needed – to make the really tough decisions. This is one of the most beautiful aspects of being social (including embracing social commerce) – it causes a shift in culture to more customer-centricity. We’ve called this “customer oxygen.”
Keep your eye on the electric car movement, by the way. I initially wrote about it in December of 2006, citing Tesla (which is publically traded now and worth $2.4 billion). Since then, the technology accelerations have been breathtaking for the historically-slow auto industry. Everyone, from Audi to Porsche and from Ford to GM, is starting to embrace this movement. And not necessarily just because of rising gasoline prices – it turns out you can actually create a better car this way, as Porsche proved with the launch of the 918 Spyder.
2. Netflix vs. Blockbuster
This was the most popular series I wrote as a blogger and it includes powerful lessons on the power of word of mouth as they pertain to “bad profits.” It is a four-part series that spanned three years, and I encourage you to read it from the beginning. You can see the final post here, written in March of 2009. Since that date, Netflix has transitioned to become a video-on-demand company and now carries 20% of all non-mobile U.S. Internet traffic during the evening. Netflix could buy 385 Blockbusters with their market cap now, a staggering $10 billion, with Blockbuster worth $26 million and being traded on the pink sheets. This chart tells the story well.
As I reflect on this, I believe that now is the time, more than ever before in history, to analyze your customers’ conversations online, your digital word of mouth, and understand the sentiment about your potential sources of bad profits. Technology, and specifically the Internet, allows for faster evolutionary cycles. We’ve seen this with Groupon’s assumed valuation of $15 billion, Facebook’s new valuation of $70 billion (congrats on the awards, by the way; we took everyone at Bazaarvoice to see the movie the day it came out and loved it), Amazon’s public valuation of $84 billion, or Google’s public valuation of $199 billion, worth more than Walmart in today’s market. These are very young companies – 2 years, 7 years, 16 years, and 12 years old, respectively. As business historians look back on this period, they will say that the scale benefits, which were responsible for Walmart’s incredible rise and many others, were dramatically accelerated by the rise of bits and the Internet. Digital businesses, connected to a global, networked community, allow for faster scale achievement than ever before. This is very disruptive to established players, as we’ve seen with Netflix vs. Blockbuster. So analyze your negative word of mouth quickly and reinvent yourself quickly without bad profits at your core.
For the record, I believe that Walmart is very customer centric, I simply point to them as an example for valuation purposes because they have been so incredibly successful at leveraging scale. Keep an eye on Amazon vs. Walmart and the rest of retail. Amazon continues to build out distribution centers (now totaling 38 worldwide with new ones launching every quarter) and very successfully launched Prime (but it’s still only 3% of their customers although it drives up their lifetime value by 150% post adoption). We posted a call to action for retailers back in November of 2008 due to Mary Meeker’s report, but there is still much for retailers to do to ward off the scale threat that Amazon poses.
3. The near demise of BP
The Gulf of Mexico oil spill was the worst in history, and I remember our Chief People Officer, Gillian Felix (who is British), telling me that this could be the demise of BP. Today, BP has rebounded to a $154 billion valuation as Gulf microbes saved the day, cleaning up the Gulf far faster than expected (reminds me of the movie the War of the Worlds). I would say that BP has done a good job of highlighting positive word of mouth about their community actions in the damaged regions. They started out as terrible in this regard, shunning counter PR efforts, but after a new CEO they embraced PR and highlighted the healing stories in a powerful way.
4. Apple’s iPhone and iPad vs. Google Android’s many phones and tablets
I touched on this in my dozen trends post last May, but this will be the year to watch this trend. With Verizon launching the iPhone on Feb. 10 and Motorola winning Best of CES with the Atrix (see video below), this will be a tectonic battle. The WSJ did a good job of covering this in James Stewart’s opinion piece on Jan. 16.
Speaking of the news, we were proud to have this year kick off with a bang. We were honored, along with the rest of Austin, to be featured on the CBS Evening News two Fridays ago. It is sure to be an amazing year for Bazaarvoice and the social commerce trend, and we do not take your support for granted. Thank you. We wish you much health, love, and prosperity this year.