Tuesday, June 12, 2012

The Cloud: What Could Posiblay Go Wrung?

The Cloud.
Looks so serene from up here.
Everywhere you read and hear lately, the whole world is moving to Cloud Computing. Hard drives, CD-ROMs, DVDs, paper, client-based computing, local data storage; all will be a thing of the past, as obsolete as food. This is where the world is going, so you might as well embrace it and join the 21st century.

Really, it makes so much sense: Instead of that quaint old custom of storing your data locally, and backing it up remotely, why not just forget the local part altogether? What's so special about your precious hard drive anyway? All you need is a reliable, secure WiFi connection to the Internet with ultra-fast throughput. Who doesn't always have that? (Well, I don't, but I don't count.)

And doesn't it make so much more sense, instead of being able to run your own version of whatever program you need, installed on your own computer, to be able to access the latest version (provided it's still supported) from a centralized server somewhere in a big building in Akron, Ohio? All of your data, all of your computing in one, lightly guarded warehouse on one machine that will never, ever, ever, ever, ever, ever, ever, ever, ever, ever crash. And all of it owned by a company that will never, ever, ever, ever go out of business. Makes me feel cozy all over.

The other no-need-to-worry thing about the concept of Cloud-Only Computing is that someone else has access to your data. And they've promised that they won't let anybody else look at it. Like Linked-In or E-Harmony or Google. They promised, too. Just read their privacy policies (there's a link somewhere on their sites).So we can all rest assured that whatever sensitive files you've stored on that server in Akron, nobody else will ever be able to get at them...ever, ever, ever, ever.

As Usual, I Don't Know What I'm Talking About

Of course, I've been told I don't know what I'm talking about--by people who do know what they're talking about. And they're right, I don't. I'm a digital Luddite. I'm just an ad writer. But as one of the billions of "targeted" users of The Cloud, my itchiness about it follows Unbreakable Rule of Marketing #2: Perception is Reality. My perception's not good. And my reality is; I can't trust The Cloud.

We've all also experienced the phenomenon of People-Who-Know-What-They're-Talking-About getting it completely wrong. Allow me to jog your memory. There was the BP oil spill in the Gulf in 2010 and the Three Stooges attempts to cap it. There was the sub-prime-contaminated credit-default-swap debacle of 2006-8, where economic experts assured us nothing could go wrong, and then the worst bank collapse since 1929 happened. There was the nuclear reactor meltdown at Fukushima in 2011, where the plant was built to withstand a 7.3 magnitude earthquake--and what are the odds of a 9.0 earthquake? (Really, let's get serious.) It's gotten so whenever I hear experts reassuring us that nothing bad could happen, I hang on to something.

So in spite of exhortations that The Cloud is where the future of computing is going, I'm hanging on to my old-fashioned, client-based computing and my steam-powered, external hard-drive backup, as well as storing data on a remote server. As any engineer will tell you, in building any system, the more redundancy the better. And if the Internet does go down--which could never, ever, ever, ever, ever, ever happen, of course--I'll still at least be able to get some work done. Even on a cloudless day.

Tuesday, June 5, 2012

Facebook's IPO

Oooo! Nice suit, Mark!
There's already been a ton of press and opinion about the Fail du Jour, Facebook's IPO. So I thought, why stand snootily aloof? I've got my own opinions. Of course, I know almost nothing about Wall Street and high finance. And I'd be the last person on earth to give advice about investing. I don't want to go there.There are already way too many people, all far more savvy than me, giving out bad investment advice.

But I do know a little about brand marketing, and Facebook made some big boo boos when it came to that.

To put it pointedly, the Brobdingnagian minds that put the Facebook IPO together ignored four of the nine Unbreakable Rules of Marketing (yes, another shameless plug for our book), and it is already coming home to haunt them.

Rule #1 Ignored: Consistency Beats Ability

This rule states that in marketing anybody who sticks with a good message is going to beat anybody else who keeps changing the message for a different one.

Facebook's message has been, from the beginning, all about sharing. It was a place you could share your pictures, your thoughts, your feelings, your favorites, your likes, your whole life with all of the world--or at least, all of your friends. In spite of the confusion and controversy surrounding FB's ever-changing privacy settings (in fact, a current joke going around is that FB had to go public because even they couldn't figure out their privacy settings), it has generally erred more on the side of openness. Sharing is the Zuckerberg mantra. Until it came to its IPO.

For some reason, Mark Zuckerberg and Morgan Stanley (the company that underwrote the IPO) decided to share only certain information about the company's revenue projections with a select, privileged class of investors. In fact, they put together a two-tiered structure of investors, one tier for Mr. Z and a select group, the other for the rest of us, the hoi polloi...or, to put it in terms we hoi polloi might better understand, suckers. Some of the former group even started selling off their shares quietly before the IPO, knowing what the rest of us didn't know; that the initial price was highly inflated. Of course, the SEC is looking into this to see if there were any insider trading violations (duh!), but aside from that, it was a colossal departure from FB's consistent brand position of sharing. They didn't.

Zuckerberg went further with this stinginess by reserving for himself 57% of the voting shares in the company, so basically nobody who had invested in the company had any right to share in how it was to be run. We (both the first tier investors and the sucker-class) were just supposed to pay our money and shut up.

Obviously these actions worked against the consistent Facebook brand message of sharing. Facebook didn't want to share certain, potentially damaging information with all of its investors, and Zuckerberg didn't want to share power with anybody. It was his company. And it was to be public in name only. Go found your own social media company. This one's mine.

Rule #2 Ignored: Perception is Reality

By ignoring the Consistency Rule and departing from its "let's all share" brand position, Facebook also ignored the second Unbreakable Rule of Marketing, "Perception is Reality." They lost control of the story. People were now starting to think that all the generous, open, we're-all-one-big-happy-human-family narrative was a cynical sham. That's going to cause irreparable damage to Facebook's brand in the future

Zuckerberg hasn't helped the perception.  Since the IPO did its belly flop, by refusing to give interviews or address the embarrassing slide of the stock, he and Facebook have just let the press and comedians take the story and have their hairy way with it. Maybe he was advised by PR counsel to lay low until this all blows over and the share price stabilizes (it is as of this posting at $25.87 and still falling daily from its initial price of $38). Or maybe the perception is right; Facebook doesn't really like to share...unless it's your private data with third parties.

The CEO also didn't help his brand perception by continuing to show up at board meetings in his signature hoodie. While an adorable, iconoclastic statement when Facebook was a brash, young start-up, Zuckerberg's slacker wardrobe hasn't exactly shored up the weak brand perception. His style has now just become an affectation. If FB had risen 32% in value instead of lost that much, perhaps the hoodie image might have played well to the New Generation of Leader brand. As it was, it just reinforced the perception that the company was run by Doogie Howser (who at least wore ties).

Rule #6 Ignored: Give Love to Get Love

Facebook's violation of this rule gets back to the conditions of secrecy and stinginess that characterized the IPO in the first place. The rule states that, in order to be loved, you have to love first. You have to really love your customers, your shareholders, your employees, the whole world. And you have to mean it.

Facebook's dual-structured IPO seemed designed to piss off the maximum number of people. Zuckerberg himself made out like a bandit; literally. But he showed no love for his investors, or his board, or his customers. He came across as a greedy kid, unwilling to share either information, power, or money. Now there's nothing wrong with making a lot of money. That's great. But if you do it in such a way that a whole lot of people feel ripped off, then that same whole lot of people aren't going to love you for it. Or love your company.

My daughter, now in college, tells me anecdotally that a lot of her friends are dropping off of Facebook. I've also known a few of my own friends to have dropped off. I don't know if FB is experiencing a falloff in membership (nor do I expect them now to share that information if they do), but if the share price is any index of lovability of a company, Facebook isn't much liked right now. It may be the 500 lb social media gorilla at the moment, but it's made itself vulnerable to the next upstart who can demonstrate more respect-- and love--for its customers.

Rule #9 Ignored: Everything is Marketing

Everything has a direct affect on a company's brand, even in the complicated structuring of a public offering.  Neither Facebook nor Morgan Stanley, in their cleverness of lighting the exploding-cigar of their IPO, seemed to appreciate the damage they were going to do to the brand of Facebook itself. The way an IPO is presented is the same as a brand campaign.It's a marketing message.

It even comes down to little things. And not just the hoodie.

The fact that Zuckerberg chose to have his wedding on the day after the IPO was itself a marketing message; a bad one. Like his hoodie, it showed the millions who had considered investing in his company that he didn't respect their apprehension. They're watching their life savings evaporate before their eyes, and this kid is getting married. To some of the nonplussed public it even looked like a cynical move to protect his sudden new wealth ($20 billion) from being included as a joint asset in his marriage. California, where he got married, is a community property state, and so any assets (like stock) owned by one of the spouses prior to the wedding are not considered joint property.

I'm sure this was the furthest thing from Mark's mind. He probably was feeling jubilant at suddenly being among the richest men in the world and wanted to spontaneously celebrate by marrying his longtime girlfriend. That would be perfectly natural. Hell, I'd want to get married if I suddenly came into $20 billion. And I wish them both a long and happy marriage.

But the timing of it was brand-deaf. If, as with the continuation of the hoodie look, the IPO had seen FB stock take off instead of tank, the public reaction to the wedding might have been "Awwwwww! That's so cute!" instead of "Hmmmm...that's odd." So even something as personal as a wedding, to a public figure anyway, is a marketing message.

I did notice he wore a suit to his wedding, though. An ill-fitting one. He looked like a kid on his prom date. And I'll bet one of his shirttails was hanging out the back.

Yeah, you're right; that would be marketing, too.

Saturday, June 2, 2012

Spend or We Resort to Human Sacrifice

We could try sacrificing some
virgins to appease an
Angry Economy.

I hate to admit this. But I happen to agree with George W. Bush's advice after 9/11, that the most helpful thing we can do right now is to go shopping. Sounded shallow and insensitive at the time. But he was right. About that anyway. He wasn't right about going shopping for WMDs in Iraq. But he was right about going to the mall.

Okay. Okay. But let me finish:  In my book, The Unbreakable Rules of Marketing, and in past blogs, I have repeatedly urged companies to spend more on marketing during economic recessions, not less. Unfortunately, the first impulse of so-called prudent CEOs has been to ease off on marketing spending during tough times--not pour it on--as if it were a luxury not a necessity. But that is the worst thing they can possibly do. It's equivalent to the medieval doctor's practice of bleeding the patient when they're sick (and if they get sicker; well, bleed them some more). Or it's like jettisoning the wings to make the plane lighter. Pick your simile. It's just bad, bad, bad to stop spending during a recession. During fat times is when you can (and probably should) slow down. But when the economy itself slows down, that's the time to spend. I shall explain.

Yes, I Base My Economic Theories on a Cartoon

I recently saw a four-year-old rerun of a South Park episode (Margaritaville) in which the town's chronically silly adults decide that The Economy is angry at us for spending so much and decree that everyone should stop spending in order to appease The Economy, so it will smile at us again...as if The Economy were some pagan god. So they impose a regime of austerity on the town and anyone caught spending anything is "dealt with" as a heretic.

Guess what happens? (In case you haven't seen this episode). Yup, the town's economy gets worse. Nobody is buying, nobody is shopping, nobody is working, and the economy (as opposed to The Economy) gets worse. That's because it isn't some supernatural deity, it's the very act of everybody spending, working, buying, making, selling, consuming, living, and keeping goods and services and MONEY flowing.

The economy is flow. If you stop the flow, there's no economy. It turns into a stagnant swamp...one that eventually dries up (the metaphors never stop).

At the end of the episode, Stan, in a heroic act of self-sacrifice... But that would be spoiling. Suffice it to say that it involves spending.

As old as this satire is, it seems to apply even more today, almost four years later, with The Economy still angry at us. Though it has been manifestly proven, beyond a shadow of a rational observer's doubt, that austerity policies have been worse for the economy than spending, the blind faith in these "belt-tightening" measures seems stronger than ever (see my previous blog post on irrational beliefs). Economist and Nobel Laureate Paul Krugman describes this as belief in "The Confidence Fairy," another mythical being whose magical powers get an economy moving again because austerity policies somehow create "confidence" in investors. But even though we've been savagely slashing public and private spending for four years now, The Confidence Fairy still hasn't delivered.

Maybe we just need to bleed the patient more. Or we need human sacrifice.

The Maxwell Equations and the Economy

Don't worry, there's no math, and just a tiny bit of physics.

An old and astute friend of mine, William Glenn, once told me of his theory of the economy (get ready for another metaphor...I've got a million). He said that money was like light; it has to be moving to exist. A photon doesn't exist at rest, since its mass is zero (here's where the Maxwell Equations on the propagation of electromagnetic energy come in). It can slow down, but never stop, because when it stops, its mass goes to zero and, poof, it disappears. It's no longer a photon. It's gone.

(Don't believe me? Do this experiment this at home: Take a photon and put it in the freezer until it slows to a stop. When you open the freezer, it'll be gone. Try it.)

A dollar bill, by analogy, is like a photon. At rest it's just a piece of paper, representing the potential of what a dollar can buy, but it's essentially worthless until it starts moving; that is, until you spend it. The economy, according to Glenn, is the aggregate flow (or current, in Maxwellian terms) of all dollars (and euros and yen  and schlobotniks) in motion. When those dollars get stashed in mattresses, cash funds and freezers, they stop moving, and the current of the economy drops to zero. All that saved money becomes worthless, just paper. Photons at rest.

Spend Like the Wind

So while saving money might be considered virtuous--in moderation--it can be unhealthy in excess, and downright disastrous in an unhealthy economy. Every dollar you or your company saves, is a dollar that is not being spent. And the size of the economy shrinks and shrinks. So you end up with, as the genie in Aladdin says (I do love cartoon wisdom), "Unlimited power! Itty bitty living space."

That's why it's important to spend, not just on marketing (if you're a business), but on goods and services, on employees, on making things to sell, on all of that. Spend, spend, spend. Shop, shop, shop.

We're all part of the same super-organism that's the world economy, and unless we keep the blood flowing (can I pile on the metaphors, or what?) we'll all die. Of course, it's important not to be profligate, and to spend prudently, but in slow economic times, I'm afraid Bush was right (and you don't know how it galls me to admit that); go out and shop. You're keeping businesses in business, employees employed, and The Economy appeased. So it will stop being angry with us.

Or we could try human sacrifice. I live near a volcano.