Shooting from the Hip: LinkedIn Knocked Out

Shooting from the hip: LinkedIn Knocked Out

On Friday 1 May about $7 billion evaporated from the LinkedIn market valuation. That is a lot of money. It manifested in a 20% drop in the share price, although at times the share traded down more than 25%. Enthusiasm is not what it was.

One way of looking at a share value is to compare the price to the earnings of the company. This is the Price Earnings ratio (PE ratio) and historically, over the very long term, it has averaged at 17 for all of the S&P 500 Index. To give an idea of where LinkedIn sits, its PE ratio is currently over 500 and has been higher than 2100 during 2014. With a loss of $0.34 per share in the last quarter, you are paying a great deal of money in the hope of future growth and profit.

Source: nasdaq.com

It is this future growth that many reports have previously mentioned. They spoke of revenue growth, earnings growth, unique visitors, ROI and growth in members which now stands at 364 million and is 23% higher than last year.

But the detail that appears to have rattled the market last week, is the poor guidance on future revenues. For the second quarter of 2015, the company expects earnings of $0.28 per share, on revenue of $675 million. By comparison, analysts had projected earnings of $0.74 per share on revenue of $718 million.

For the full year 2015, LinkedIn projects earnings of $1.90 per share on revenue of $2.90 billion. Analysts expected earnings of $3.03 per share on revenue of $2.98 billion.

Advertising accounts for only 19% of LinkedIn revenue. It is very evident that for long term viability this contribution must grow massively. Worryingly the contribution of advertising has remained virtually flat, rising only from 18% last year. While Talent-Solutions, their recruitment arm, provides the bulk of ad revenue, and has grown, Display Ads have fallen steeply most notably within Europe where they almost disappeared. Taking up some of the slack was Content Marketing which also helped keep the total ad component of revenue flat.

LinkedIn’s results last week were interim results. Full year results will come later in 2015. But the forecasts are amended sharply downwards and this did not sit comfortably with investors and shareholders.

But the feature that remains most worrying, certainly to the old school clique, is that LinkedIn does not make money. And by that we mean profit, not revenue, that is available to shareholders as dividends. After last week it appears more unlikely in the immediate future to make any profit at all. If a business loses money, even 1 cent a day, day after day, it will eventually die. That is a fact. LinkedIn does not make money and it does not pay its shareholders a dividend. It’s a waiting game.

Last week revealed the fragility of this waiting game with similar downward forecasts and sharp share price corrections occurring for both Twitter and Yelp. It was, in short, an interesting week with three major tech companies reporting downbeat interim results almost simultaneously.

In this new evolving digital era it is clear that not all current players will be equally lucky. The real battle lines have yet to be drawn. There will be many more successes and failures as the industry moves beyond infancy. There will also be consolidation and efficiency gains with the victors emerging stronger than before.

Many see the current share price declines as a buying opportunity and maintain that these tech giants will successfully monetise their reach in time. In contrast there are others such as Dan McCrum of the Financial Times that take a more jaundiced view: What may be different this time are downward moves for some of the larger tech stocks prompted by disappointment around earnings, indicating genuine reassessment of the potential for these companies to take over the world.

2 Billion Channels of ME

http://themediaonline.co.za/2015/04/shooting-from-the-hip-two-billion-channels-of-me/

The Nobel winning economist Paul Krugman once said: “The growth of the Internet will slow drastically, as the flaw in "Metcalfe's law" ….which states that the number of potential connections in a network is proportional to the square of the number of participants, becomes apparent: most people have nothing to say to each other!”

Is this comment valid, especially in the context of social media? Do people really have that much to say to one another? Is there a deep well of nascent verbiage advanced only by the latest techno evolution?

Social media growth is staggering. The latest figures suggest that Facebook has 1.3 billion users. Add to that 350 million LinkedIn profiles and a few hundred million for the balance of “smaller” platforms and it is easy to arrive at 2 billion social media profiles, give or take a few million for duplication.

Psychologists have spent time exploring the narcissistic component of social media. It is said that we have 2 selves: the “now self” and the “possible self” (Markus and Nurius 1987). The internet allows a person to become their “possible self” or at least a version close to it. And there is evidence that Facebook usage is associated with narcissism.  Every narcissist needs a reflecting pool. Just as Narcissus gazed into the pool to admire his beauty, social networking sites have become our modern-day pool.

Putting it bluntly, the 2 billion social media profiles are 2 billion channels of ME. The writer and social commentator, Charles Hugh Smith, described this saying that with a captive global audience everyone now has the opportunity to launch their own channel. Two billion new media channels and of course …. a glut of mediocre content … including selfies. 

Scarcity creates value. The vast surplus of social media content easily reduces its value to zero, perhaps less. To counter this vacuum of value people seek “Friends” and “Connections” and try to build a robust “audience” for ME. Is this truly the environment that advertisers seek? A glance through the Nielsen archives revealed some work done in late 2013 showing that media environment still impacts perceived ad credibility (as it has always done) with social media languishing at the bottom of the hierarchy.

Nielsen Consumer Trust in Advertising 2013
Word of mouth	84%
Branded websites	69%
Consumers opinions posted online	68%
Editorial content such as newspaper articles	67%
TV ads	62%
Brand sponsorships	61%
Newspaper ads	61%
Ads in magazines	60%
Billboards	57%
Ads on radio	57%
Emails signed up for	56%
Ads before movies	56%
TV programme product placement	55%
Ads in search engine results	48%
Online video ads	48%
Ads in social networks	48%
Display ads on mobile devices	45%
Online banner ads	42%
Text ads on mobile phones	37%

If it is truly narcissistic and if we really don’t have that much to say to each other, it becomes easier to grasp that even behemoths such as Facebook can stop growing or even decay. The latest figures from GlobalWebIndex suggest this is happening in places:

GlobalWebIndex surveys 200,000 Internet users annually. If we look at the top 10 social networks and compare Q4 2013 results against Q4 2014, Facebook is the only one that saw a decline in active user numbers.

So, what’s going on here? First, Facebook’s definition of an active user is now so broad that you can do very little on the site and still be counted within its figures. Secondly, and just as importantly, GlobalWebIndex’s data shows that, while Facebook’s active user numbers are undergoing consistent declines, its member and visitor numbers are either holding steady or increasing. Clearly, we have a large group of Facebookers who are checking the site but not actually contributing to it.

To find evidence for this, we need look no further than the U.S. and U.K. (which, as Facebook’s oldest two markets, are typically seen as bellwethers for wider trends). Of the 15,000 people we surveyed in these two countries, half of Facebook’s members said they were using it less than before (rising to two thirds among teens). The main reasons for this were pretty revealing: A fifth said they were just not as interested in the site as they used to be. A similar number said they were simply bored.

Was Paul Krugman right? Probably not. People like us, it seems, do have a lot to say to each other. But we are choosing new ways of doing so.

Novelty, narcissistic fatigue, more efficient platforms? It’s difficult to say but there is rapid media evolution. Perhaps it is the simpler exchange/dialogue platforms that will drive the next growth phase. Perhaps we are not that self-interested after all.

Rapidly growing platforms include QQ in China, WhatsApp and others such as Instagram and Twitter.

What is certain is that things change quickly and despite its size and dominance the future of Facebook and other social platforms is not beyond debate.

References 

1 Buffardi, L. E., & Campbell, W. (2008). Narcissism and social networking web sites.Personality and Social Psychology Bulletin, 34, 1303-1314. doi:10.1177/0146167208320061

2 Mehdizadeh, S. (2010). Self-presentation 2.0: Narcissism and self-esteem on Facebook.Cyberpsychology, Behavior, and Social Networking, 357-364. doi:10.1089/cyber.2009.0257

3 Ryan, T., & Xenos, S. (2011). Who uses Facebook? An investigation into the relationship between the Big Five, shyness, narcissism, loneliness, and Facebook usage.Computers in Human Behavior, 27, 1658-1664.

Resurrection of News

There is a new digital “social” platform. It is called Ello. It purports to be ad free and independent of influence. Started by a designer, it has attracted many talented graphic and design artists, and because of this there is some really beautiful work to see on Ello.

But there are other contributors too, including a page from Bloomberg which I elected to follow. In keeping with the general artistic bent of Ello, the Bloomberg page is populated with many beautiful charts and diagrams and pictures … and very few words.

It was here that I saw a chart depicting the decline in TV news audiences across the USA over a 20+ year period. My gaze was instantly arrested. TV news audience decline? While the explanation centered on news anchors and studio infighting, I saw one thing only. I saw newsprint written all over the chart. To me it echoed what I knew to be true in the newsprint medium:

A little rough mental arithmetic showed that the TV news audiences had come close to being cut in half. This was profound erosion. More importantly it had come on the back of growth of TV as a medium.

There was only one thing to conclude. “News” was the weakness. Surely a decline in TV news audiences alongside a decline in newspaper readership eliminates the medium as the cause of the trend?  I thought of newspapers. Could it be true that the news part of newspaper is the issue, not newspapers per se?

In the past half century, increasingly it is argued that the news we see and read is the news that the media elects to call news. We are told it is NEWS and therefore it becomes news. Could this ‘push’ model of communication be dying? News for me is new information that I can integrate in my thinking and my choices. It might even build some character and resonate with my personality. News is what should smooth out some of the rough edges and possibly make me a little more interesting to others.

We can pontificate about what is news and what is not news and then we can debate about how we get news. I chat to my children who neither watch the news show on TV nor read newspapers, yet they say newspapers seem cool. They say they would read them if there was a reflection of hipster culture. If there was something they could keep. If it was beautiful.  They actually seem to like the concept of a newspaper. Or should that be daypaper or citypaper?

With the growth in digital media audiences, the drive for bite sized info chunks and staccato communication, we know that much of modern dialogue is around events and feelings and reactions  and consumptive experiences.  We seek out the specifics that help us make better choices to get through the day.

In light of this, much of what is presented as news is noise. TV news audiences declined because the news they reported was not needed. Perhaps similarly with newspaper readership.

But no one would say that TV is anachronism. And the news reported can change. Indeed it seems to be doing that. In the chart above there is a turning point. 

Corporate Identity Construct

For more Corporate Identity diagnostics please contact andrew@noted.co.za

I ran a BAREFOOT MARATHON and I learnt about MINDFUL BUSINESS

Recently I ran the Cape Town Marathon. Barefoot. Even as a regular runner this was, for me, a little unusual. Not only was it outside my comfort bracket but it was also outside the "comfort bracket" of several people close to me. My behaviour was "off the page". This, I was told, was fringe stuff and a little disquieting. Why on earth would you embark on such a
Mindful run?

But it did prompt a little thinking and encouraged me to scrutinise other areas of my life including my approach to work, engagement with others, and what I wanted to leave behind, my footprint.

I think most people have heard the term Mindfulness and it may have reached the status of a business theme de jour. It is taught to most aspiring business leaders and in this setting, mindfulness is about paying attention and observance, and perhaps even seeking inner strength. The belief is that with increased mindfulness we can be more creative, productive and find greater inner satisfaction and motivation.

Reading this you may think that mindfulness has a lot in common with many eastern theologies and you are probably right. But while mindfulness may be a western adaptation of eastern mystical dogma and ritual, it's business goal is very different.  In short, the business cognoscenti have embraced mindfulness because it is believed that it will lead to greater productivity and profit. And that, is my issue.

At the start of the marathon, walking around barefoot I was struck by a sense of exposure, almost indecency. Vulnerable was an understatement. But the training and the preparation were some comfort and I hoped (... vainly) that others were indeed overdressed, rather than me being under-dressed. It made me wonder what we need to perform well - what is essential and what is baggage? The preparation does, to some extent remove the need for additional layers of protective clothing, but there was another element at play too. In preparing to run barefoot the primary goal is to build strength, resilience. Additional layers of impact absorbing, cushioning underfoot-techno-rubber do nothing for one's strength and resilience. Ironically they actually promote weakness which meant that after 25 years of traditionally-shod running, I had started my preparation with a deficit of tenacity. I had become weak! Only through the removal of the superfluous underfoot layers did I have a chance to build authentic natural strength and resilience.

Maybe our desire for "things" and our embrace of "consumerism" is far more pervasive than I believed. We consume more and more of what we do not need. We don't question what we use. This is the mantra of our society - at work and play. Now I was exposed, naked from the knees down, and hopefully better for it. My footprint was smaller, my stride was lighter, and ironically I was stronger. With less. And I wondered to what extent we seek to build resilience in our productive enterprise? To what extent do we realistically forego short term comfort and seek instead long term robust strength?

It is about our goals. Since the end of World War 2 the rate of business growth accelerated on the back of a global consumerism trend. This was good, the experts said. Everybody would be freed from the drudgery of the daily grind. We'd all have pop-up toasters, double garages, microwaves, colour tv's and a lot more free time. And so the religion of "stuff" took hold. And we all got ipods and drowned the whispers of any inner honesty. But the Keynesians said it is good and they printed more fiat money "proving" the nirvana of endless economic growth was here to save us from dull domesticity. Is this the mindset that drives us to the local gyms to build the perfect physique at 5am in the morning before the 10 hour shift in the climate controlled office with the posture sapping "ergo" chairs and the Bisphenol-A leeching bottled water*? Is this is the mindset that inspires our excitement when we empty our purses for the latest techno running kit designed for the "rigour" of the treadmill with 24/7 streaming CNBC?

Now I was setting out to run barefoot as were many other "left of centre" enthusiasts across the world. We knew that to be effective we had to increase the cadence. Our feet had to strike the ground 185 times a minute or more. Higher cadence reduces the impact and effort of each stride, making running lighter and safer. We had to avoid the herculean, thud-thud, slow hammering that big shoes dictate. Each barefoot step is a victory. Each light step is a celebration. These were "small wins" and I knew I had to seek them elsewhere in my life. Small wins, cumulatively create big leaps forward. It is often our hubris and conceit that leads to ill-conceived Don Quixote style windmill attacks. Tackle the small issues first. True progress is often minuscule, underfoot, unnoticed yet significant. This is true in business, and impacts our understanding of innovation, another hackneyed term. Innovation is often a series of small, sometimes imperceptible "wins". It's no use looking to "change the world"! History proves that this is unlikely. It's far more useful to look for small gains in efficiency and performance and in time, these will cumulatively create the steps forward that we desire.

And it's about risk too - but not much! Sure, running barefoot is about the risk of cuts and damage and even catastrophic failure. But risk is relational. It depends where you stand. And it also changes in time. Risk can be mitigated, even ameliorated. How different is barefoot running to shod running? Perhaps, more importantly our perceptions of risk are merely a deep desire to protect the status quo. We conjure risk to validate the intransigence of our behaviour.  Approaching it differently, with a new mindset, could risk, as we currently define it, become irrelevant? We need to learn to embrace new challenges, seek internal knowledge, learn from within and translate that understanding to action. We need to revisit this in business and it should not be confined by historical risk tenets.

And it's about being "present" too. Running barefoot is more than being mindful, it is about presence - an engagement with the world as we find it now. A state in which "now" and the end point, the goal, are the same.  It is not process driven, it is immediate, sensitive, authentic, reflexive and robust. Being present subordinates risk while elevating honesty and frugality. Do it now, honestly, for that is the reward. Each step, each small win, each honest commitment is the prize. This I knew implicitly when running barefoot and my marathon ended as one of my best long runs ever.

And it's about metrics too. Sure, it was a "good" marathon, a barefoot marathon. But what metrics did I use to make this judgement? Running is normally about time. We measure how well we do by the lapsed time. In most instances it's all we know and thus we seek to optimise time. But my barefoot run was different. I didn't time my run. Time was the wrong metric. I knew I had to closely guard other metrics such as foot-feel, road surface, heat, and so on. In fact I knew a watch would be a distraction. Perhaps because of this I enjoyed it. I was absorbed, running mindfully, present, and still my time was not too shabby. Is business different? Do we use the right metrics to measure what we do in business? Is profit the metric and should all our efforts be directed at optimising for this goal? Surely we need to change? After 70 years of soulless homage to fiat currency and the pursuit of profit, is it not clear that this vacuous pursuit needs a new script? Should we not pay more attention to the "triple bottom" line, the three P's? Is it not imperative that we start the conversation about building an economy that respects the planet and it's people? Can we leave a smaller footprint?

After a lifetime of plastic junk accumulation, massive amounts of senseless driving and flying, constant prodigious production of waste and depletion of resources, who asks the question: "Can we do it differently?" Mindful Business needs to be about more than the end point. It needs to be about Presence - now is the goal. Rather than arriving mindlessly at a "profit" we need to mindfully build a wider base of business returns. While embracing the 3 P's we need to optimise for different metrics.

• Alter our risk framework
• Communicate and operate in the "present"
• Seek and celebrate "small wins"
• Build authentic honest engagement
• Note the footprint we leave

Famed alpinist and founder of the Patagonia Company, Yvon Chouinard, once said: "He who dies with the least toys wins. Because the more you know the less you need."

The story of my CT run is here: http://t-rockets.blogspot.com/2014/10/the-non-definitive-guide-to-running.html

*http://www.webmd.com/food-recipes/features/cookware-plastics-shoppers-guide-to-food-safety

Tesco: An Opinion on the disaster from afar! (and with limited resources)

GAMIFICATION PRESS RELEASE

Gamification is more than games and some people don’t get it.

Recently there seems to have been a spate of people commenting and postulating about gamification. Suddenly it seems as though we have a lot of new experts proffering opinions. “Gamification will work for brand X but not brand Y!” or “Gamification can only be used in these types of instances” are some of the comments I have read.

But what, you may ask, is gamification? And here the answers are equally diverse. “It’s about rewards”,  “It’s about fun”, “It’s about getting people to talk to each other” and so the opinions flow. Is this correct? What is gamification actually about?

These comments probably do relate to gamification but they miss the broader empirical theory of gamification, relating more to specific instances of gamification.

Gamification is defined as “the use of game elements in non-game environments”. So, gamification may or may not involve games, but it always involves elements of games, such as fun, challenges, sharing and rewards.

So, you may ask, what does gamification do? At the broadest level gamification is about Behaviour Change and it achieves this through building Engagement and driving Motivation.

There are many successes to validate the claim on behaviour change, so I'll offer an example, a clear demonstration, on how gamification can lead to predictable and positive behaviour change. If you put an electronic sign on a road that shows motorists the speed at which they travel, the proven, predictable result is that motorists slow down. It’s as simple as that. The electronic sign is, in fact, an element of gamification in that it creates a feedback loop. In gamification this particular loop is known as an “engagement loop”. The sign gives feedback which is creates motivation on the part of the motorist to amend their action.  This kind of loop builds engagement which is very desirable in many different fields of human endeavour. Besides Engagement Loops, Gamification also makes use of Progression Loops which develop skills.

As far as Engagement is concerned, think about the worlds most played game .... solitaire. Microsoft claims that people spend 9 billion hours a year playing solitaire. And they do this at work! Even though solitaire is not a very good came, simply look at how it draws and engages people. Just imagine if brands or employers could tap into a little of this type of engagement that games can build.

Gamification can be used in many different fields and already has a solid reputation in human resources, social action, sustainability, education and even government policy. And while certain types of gamification have been used in marketing and advertising for some time, it is only lately that they are being referred to as “gamification”.  

Examples that spring to mind include Nike with its Tag game, Procter and Gamble’s Olay and even Coca Cola Rewards.

The uses of gamification are potentially so widespread that it is difficult to ringfence appropriate applications. We can’t speculate “which brands” or “which consumers” are more suitable for gamification. The correct way to evaluate the possibilities is to ask the questions …  “what change in behaviour, if any, is desired?” or "where do we need to build engagement?"

Behaviour change is also a function of Motivation. Traditionally we have believed that motivation and ability are good enough to inspire behaviour, but recent research work proves that a Trigger is needed. And the important point here is that gamification acts as a the Trigger.

As a technique, gamification is particularly relevant in areas where we deal with low interest or low motivation. One of the early successes of gamification that comes to mind involves Microsoft who had struggled to clean up a particularly tricky piece of computer coding. It had to do with translating languages and was completely resistant to de-bugging. Coders and programmers couldn’t get it right until Microsoft “gamified” the task and presented it to several thousand of their programming staff worldwide. At no cost to the company they managed to get their programmers so fired up about cracking this code, that they all wanted to work over-time, not only to prove their superiority to colleagues, but also to impress their superiors. It turned into a massive internal race and the work was completed within a few days … completely bug free and at no additional cost to Microsoft.

So gamification is about engagement, motivation and behaviour change.  It draws on rewards, fun, meaningful choices, immersive experiences and so on. Gamification is new and developing extremely rapidly and because of this we learn of new applications every day. It is likely that gamification, as a tool or technique, can still develop much further as our knowledge grows and is thus likely to become integral to the marketing and business landscape.