Entries Tagged 'social media' ↓
February 12th, 2011 — baltimore, business, design, economics, geography, philosophy, politics, social media, trends
Newly-elected Maryland State Senator Bill Ferguson was recently named to the Baltimore Business Journal‘s Power 20. This week they asked me, as a friend of Bill’s and member of a previous Power 20 cohort, to comment on Bill’s relationship with and use of power.
“Bill is a curious, humble, and earnest young man, and he represents a true shift in how power is conferred in this town,” I said. “He didn’t work his way up through the ranks and spend a few years as a city council person, or wait his turn. Bill was able to win because of a shift in political power that’s taking place right now. He derives his power from the people, not from the system.”
Political power is now being conferred through the accumulation of weak and strong ties with citizens, and no longer by top-down power structures, power-brokers, and kingmakers. Don’t get me wrong; those folks still have an impact (they did in Bill Ferguson’s race – they got behind him when it was clear he was onto something), but that impact is waning. And things that were previously unthinkable are now possible.
It may seem like hyperbole to compare the situation in Baltimore to what took place over the last three weeks in Egypt. But it’s an apt comparison.
For decades in both places, people have felt marginalized by a top-down, tone-deaf government that was more interested in its own well-being than that of its citizens. In both places, decades of neglect and mismanagement have led to a serious crisis of confidence.
People are fed up. They’re tired of feeling marginalized, the failed programs, the broken promises, the lack of accountability and the inability to implement imaginative solutions. For 60 years, Baltimore’s population has been in decline, and places in decline have not had the benefit of oversight, dollars, or creative leaders. Instead, corruption (explicit or implicit) festers.
The Perfect Storm
Several factors are emerging all at once:
- Young people want to live near their work and are tired of commuting (and they’ll accept a pay cut to do it)
- Our roads are full and can no longer be meaningfully expanded due to lack of space and funds
- Fuel costs are projected to rise as China’s demand grows exponentially
- Online networks are having a meaningful impact on real-world relationships and politics
These factors, combined, have made Baltimore the most important jurisdiction in Maryland – practically overnight. Yet our leadership has not caught up with this reality.
Baltimore’s recent rise to relevance combined with the power of communications networks will create stark shifts in the power structure.
Two Kinds of Leaders
Today we have a choice between two kinds of leaders. We can choose between the leaders that the system hands us, or we can choose to put our faith in new, emerging leaders with whom citizens have a legitimate connection and a voice.
|Product of the system
||Newcomers, inspired to serve
|Disproportionate influence of money
||Driven by small donations, connection with people
|Ideas come from insiders and developers
||Ideas come from anywhere and from study of best practices globally
|Power comes from the top-down
||Power comes from legitimate engagement with citizens
|“Openness” is skin deep, only ‘fauxpenness’
||Transparency at every level; data is a strategic driver
|Secrecy and private realities drive decisions
||One shared view of reality drives all decisions
|Treat Symptoms: Problems (poverty, crime) are “mitigated”
||Address Root Causes: Focus on wealth creation
|Social media is a “one way,” Orwellian broadcast tool
||Social Media is a “two-way” engagement tool
|Over-Confident that the system knows best
||Open to Questioning: People know best
|Boomer-centric: top-down, command and control
||Gen-Y Centered: Collaborative, flat organizations
|People are engaged to placate them
||People are legitimately engaged
|Fear of reprisal keeps people in line
||May the best ideas and people win
||Will serve only as long as effective
It is sadly telling that Mayor Stephanie Rawlings-Blake’s much-promoted (Orwellian, broadcast-oriented) Safer City social media campaign follows just one person on Twitter: the Mayor herself. And it has just 78 followers. Why? Because it’s all for show, and no one legitimately cares about a program to mitigate a problem – people actually want to solve it at the root. To hell with a Safer City: give me a city where everyone can earn a living, and I can bet you it’ll be safer.
But our politicians don’t know that, because they have not taken the time to benchmark ourselves against other cities or learn from best practices elsewhere. Baltimore has more cops per capita than any other city. Why is that?
Because we need them. Why do we need them? Because we have a lot of crime. Why do we have a lot of crime? Because we have no middle class. Why do we have no middle class? Because we have not seriously focused on enabling small business formation, which is the number one driver of jobs. Instead we have given tax handouts to fatcat developers so they can build big projects and enrich their cronies.
Yes, clearly the cure is more cops. As the Mayor told the Baltimore Sun’s Justin Fenton, “Maybe we could do without as many officers, but that’s not what the public wants. They want more patrolmen on the street. They want more police in the neighborhood.”
No, Madam Mayor. What the public really wants is for these root cause issues to be addressed. It takes true leadership and understanding to go beyond just treating the symptoms.
Some have called the recent events in Egypt “the Twitter and Facebook revolution.” A few have scoffed at the idea that these tools could spark a revolution and cite eons of revolutionary precedent as proof. But it’s a mistake to dismiss their role.
Online networks are accelerants. They create connections passively where none might otherwise exist. Critical mass for change comes when the density of connections between people reaches a threshold level. Ideas spread between networks instantly. What might have taken 10 years before now takes 1 year.
The Soviet regime could never have survived in the age of networks. Iraq would have collapsed under its own weight if given time and these tools.
And the same repressive structures will fall in Baltimore, for the same reasons.
To quote Gandhi: “First they ignore you. Then they laugh at you. Then they fight you. Then you win.”
January 23rd, 2011 — business, design, economics, geography, social media, software, travel, trends
50% Off Loaves and Fishes…
Every few years a company emerges that grows so swiftly that it manages to define the zeitgeist and often helps to inflate a bubble that defies any rational explanation. Often these businesses are driven by new, disruptive ideas that take the market by storm and create a real shift in how people do things. Amazon (and online shopping), Google (and the search business), and Apple (music, smartphones, and touch computing) fall into this category. They created real, thick value.
For every one of these, there are others that grow, get tremendous buzz, and then seem to dissipate as quickly as they emerged. Or they settle into a kind of staid middle-age, their torrid teen years long forgotten. Think about 90′s darlings like IOmega, Boston Chicken, eBay, and Home Depot. It can be difficult to predict which businesses will stick around and which will fall away (or become low-growth, boring enterprises).
Groupon has emerged as the “Jesus Startup” of 2010-2011. The industry always needs one, and they tend to conform to an archetype and have a mythical story: the visionary CEO (Marc Andreesen, Evan Williams, Mark Zuckerberg) who experiences a remarkable rise to greatness. For this story and for these 15 minutes, we have Andrew Mason, the humorous and self-deprecating everyman who declares of the fledgling Groupon, “We could still fuck this up.”
The implication is that they’ve done something to “ace” it so far. But the truth is that they are just regular guys that started out doing something else (some kind of social mission charity stuff – blech – don’t talk about that, it’s not compatible with the visionary myth). And after executing on their original idea and experimenting a bit, they found themselves in the middle of a new exploding business model. Kudos for that. But as is the case with most “Jesus Startups,” there’s been a notable lack of critical thinking about what happens next.
Here’s where I think Groupon is weak.
1. Over-reliance on hypergrowth.
Groupon has posted some crazy huge numbers as they push through massive expansion into new markets. When you are turning up a new major metropolitan area every few days, gross revenue numbers are going to grow very quickly as businesses rush to be part of something that’s got so much buzz. As their geographic footprint stabilizes, top-line revenue will start to level out. When that happens, the business becomes much less interesting and has a lower upside (see Home Depot, Gap, Boston Chicken, Microsoft). This is why a push to IPO while this hypergrowth is happening seems to be a priority for the company.
2. Customer fatigue.
If you have been using Groupon, Living Social, GILT, HauteLook, or any of the countless other sites that rely on daily emails to get their message out, I’ll bet your experience has been something like this: at first you reviewed the emails every day; you bought a few things; you are now buying almost nothing; now, you may not look at the emails at all; you still have unused Groupons. Time is money, and people have too much crap. Eventually, people are not going to take the time with this. And when Groupon has exhausted all the “easy hits” that drive people to buy, then what? Besides, I thought email was “dead” and for “old people.” Right? Or did I miss something? (Sure, the deals spread through Facebook or whatever social channels, but email is a huge part of the business model.) As younger folks steer away from email, it’s an open question whether the current “daily deal” model can be sustained.
3. Business fatigue.
Businesses are tripping over themselves to be part of the latest new thing and expose themselves to thousands of customers at a shot. And sure, a Groupon deal can be a great opportunity for some businesses. But many businesses (some say up to 40%) have found that doing a Groupon deal can be a costly mistake that actually damages their business. The economics of the deals deliver a fraction (typically 25%) of the face value, which often does not cover their costs. While there is some breakage (unused deal revenue that can offset losses), this still may not cover the cost and hassle the promotion entails. Additionally, businesses that undertake in smart advertising can promote themselves all year round. A business can do a Groupon deal at most once every few months – otherwise the deal just doesn’t seem “special” enough. Groupon is a great novelty that can help some businesses become better established, but I really wonder if many businesses would participate more than once or twice, when compared to ongoing targeted marketing initiatives.
4. Scale as the only barrier to competition.
There are now thousands of competitors to Groupon (Living Social is the largest). There will be thousands more. The reason why both companies have received such massive investments to date is that they need to get big to create a local sales force in every market in the world, which is obviously an expensive proposition. If they can get sufficiently big, they can build a sustainable business that will dissuade new market entrants simply because any competitor would have to build a worldwide localized sales force. And if you’ve ever had to run a local sales force, you know that it’s a very expensive, messy, people-driven business. The business that Groupon will eventually most resemble structurally is the Yellow Pages. With sales teams in every city, the major directory publishers were able to exert a near monopoly control over the interface between local businesses and consumers, and Groupon is going after the same market. The difference is in Groupon’s use of technology and use of social. Otherwise, the two businesses are nearly indistinguishable. The assumption is that Groupon’s scale will prevent competitors from gaining a foothold, but I don’t see any real reason a focused local competitor couldn’t develop a sustainable business.
5. Tone-deaf on China.
Groupon has undertaken a massive push to expand into China. That sounds great, and any US investor would likely salivate over such an aggressive, prescient-sounding move. Ah, that Mason guy, he really knows his stuff. But my friend, China-expert Christine Lu tells me that Groupon’s Berlin office has recruited 1,000 new hires for China in the last three months – many recent college graduates. But here’s the thing. I’m currently getting a daily deal from a site in Shanghai called Wufantuan that’s indistinguishable from Groupon. (50% off Mexican food in Shanghai was one recent deal.) If you know anything about the Chinese market, you know it favors locals and cloning is part of the culture. To expect Groupon to be able to achieve anything meaningful in China is wishful thinking. Google got run out of the country on a rail. You expect the powers that be there to allow a US firm to “split” revenues with Chinese businesses to provide its budding bourgeoisie with deals on burgers, skydiving, and cupcakes? Um, yeah. OK. If there’s a business there, it will be Chinese. The entire Groupon strategy with China is theater, designed to show investors that they’re “paying attention to that market” while they ready the IPO.
So, the real deal of the day is for Groupon itself. The question is whether there’s enough upside in the model – and enough “bigger suckers” out there for the average Joe to make any money on the offering before the business model settles out and becomes the next eBay, Home Depot, or Gap. These are fine, sustainable businesses, to be sure, but all are way less sexy than they once seemed. (Yes, for about 6 months in 1995, Gap was incredibly sexy.)
Before you decide that Groupon’s the next hot young thing, it’s worth asking whether you want to jump on this model right now. I believe there’s a really nice, long term, but ultimately very boring business in there that should pay a nice dividend. Meantime, the visions of hypergrowth are likely much exaggerated.
I certainly can’t criticize the trajectory that Andrew Mason and company have managed to carve out for themselves. It’s an incredible story and it’ll be fascinating to see how it unfolds. The expectations are so high, they really can’t be met.
My bet is that they will need to move on to more sustainable forms of year-round marketing for businesses and away from the aggressive 50% discount model. That’s a much less sexy place to be and it will require some real creativity to carve out a niche there. But I just don’t buy the idea that they can continue to build a business based solely on deals of the day at such aggressive discounts.
The Groupon model right now is based primarily on creating new relationships between businesses and customers. They’ll be on to something really interesting when they can help to nurture and sustain those same relationships profitably.
I originally posted this as a Facebook Note on January 22nd, and posted it here with a few slight editorial modifications. There are some good comments regarding China that are worth repeating here. There are also many good comments on that Note that are worth checking out.
From my friend Christine Lu (@christinelu):
Thanks for the mention Dave. I think they’re hiring 1K in the next few months. As in currently in the process of. Things over there have just sounded a bit weird to be a sustainable market entry strategy so I think it’s all a nice way to have a China story to prop up the IPO. The elusive vision of 1.3 billion people using Groupon. Nevermind that clones are already saturating the market and they’ll have Alibaba’s Taobao to deal with. Anyways, we discussed it a bit on Quora.
From my friend Vivian Wang (@vivwang):
The JV is a positive differentiator for both companies and will accelerate market consolidation. There are 1686 other group shopping sites as of December, yet only 29 sites have CIECC licenses to legally operate. Some believe there are only 10 serious contenders that can attractively compete. The real threat is Alibaba and Taobao, so a more international footprint into China seems warranted. One of the smarter things Groupon did was buy Mob.ly back in May, which has been developing on all mobile platforms. For a sector that’s already doing about $79B in transactions, I think the risk seems worth taking.
Hope something truly uniquely innovative comes out of this that the world has yet to see. I’d personally love to see Tencent migrate from selling a $1B of games & virtual goods to some seriously tangible merchandise. The foolish side of me actually thinks they’ll have a fair shot at it. Should be fascinating.
And from my friend Francine Hardaway (@hardaway):
I believe all this bargain stuff, especially in the US, is part of the recession and will go away when it is over and we all relax. I agree with you 100% on Groupon’s model; I am done buying stuff I don’t need, even at half price. All the people I know who love coupons (I never have) are armed with sheaves of them, and all that happens is the merchants are in price wars with one another in a race to the bottom. Sites like Groupon and Haute Look might be marketing front ends, but they are also margin-shavers for the people in the businesses they market. This HAS to be unsustainable at the end of the day, whether China is successful or not (and I bet it won’t be, because of all the people who, when we were in China, got up and said they would clone our products in half an hour).
What do you think about Groupon?
November 18th, 2010 — design, mobile, programming, social media, software, trends
Firesheep is a startling plugin that allows anyone to easily impersonate the login credentials of others for dozens of sites. It works on any unencrypted WiFi connection and is stupid-simple to setup. It can be done by anyone in a matter of minutes.
Just to illustrate how easy it is to setup, I was on Virgin America flight VX67 from Washington to San Francisco yesterday.
All I had to do to get going with Firesheep was download Firefox (onto my new MacBook Air) using the in-flight WiFi, and then download the Firesheep plugin for Firefox. Just drag the plugin into Firefox and it installs. Reload Firefox and you’re ready to go.
Click “Start Capturing” and you are instantly snooping on every interaction occurring on the WiFi network. In my case yesterday, that meant snooping on everybody who was using the WiFi on my flight.
What’s At Risk?
Within just a couple of minutes, I was able to impersonate 3 people on Facebook (updating their status, exploring friends, doing anything I wanted to – of course I didn’t). Twitter is also at risk. So is Gmail. And so is Amazon.
Access to Amazon is perhaps the most worrying. Once I realized I was in under someone else’s Amazon account, I quickly shut down Firesheep: this is some scary stuff. What if I had changed the shipping address for the account and done a one-click order on a $10,000 watch or a $2,000 plasma TV?
This was all at 37,000 feet in an airplane (and way more entertaining than SkyMall). Like taking candy from a baby.
Even More Shocking…
Later in the afternoon I was at one of the Internet Industry’s high-profile events: Web 2.0 Summit produced by O’Reilly. There on the hotel’s WiFi, which was setup to serve the summit, I ran Firesheep. Within seconds I had compromised about 25 accounts, including the Twitter accounts of O’Reilly Media and TechCrunch writer Alexia Tsotsis. Change passwords, tweet-as-them, friend and de-friend people? No problem. Here’s what I saw. (Note that my accounts were vulnerable as well.)
How It Works
I have not studied this exploit carefully enough yet to explain it in full detail, but my understanding is that on an open WiFi network, it’s trivial to capture in cleartext all of the web interactions of the users around you on the same IP network. Once you can do that (something Firesheep achieves using the pcap library, capturing port 80) then you can sniff for credential information specific to particular websites. Firesheep supports a couple of dozen out of the box, including all major social networking sites (Facebook, Twitter, Gmail, Gowalla, Foursquare) but also some more obscure sites relevant to coders (Github, Pivotal Tracker). Ouch. It even has an “import” function so others can write exploits for sites that Firesheep doesn’t know about yet.
The bottom line is that these sites all need to enforce the use of HTTPS (secure HTTP) rather than HTTP *before* the login handshake occurs. This will force some emergency changes by many sites over the next few days.
This is not a new exploit – it’s always been possible to do this; Firesheep just makes it stupid easy.
A Note On Passwords vs. Encryption
You’ve encountered WiFI networks that require WEP or WPA encryption passwords. These are secure from Firesheep’s reach. However, there are a lot of WiFi networks that require “passwords” (such as those at coffee shops, hotels, etc) that are in fact open networks. Many do not even require you to login to them to exploit them via Firesheep. To put it in perspective, every Starbucks location is vulnerable to attack.
The only for-sure ways to stay safe from Firesheep for now are to 1) use only encrypted WiFi networks (that use WPA or equivalent), 2) use wired networks that you trust. Any open WiFi network can and will be vulnerable to this attack until vulnerable sites switch to using HTTPS for all authentication. Be very careful out there, folks.
Update: After talking with a few folks and thinking through this exploit a little further, I can offer a bit more complete of an explanation of how it works and why blocking it is so difficult.
The exploit does not actually capture the *password* itself (which is actually transmitted using HTTPS) but rather captures the authentication credentials which are stored (and visible) in the session cookie *after* HTTPS authentication has completed.
So, even a one-time password will not address this. And the reason boils down to ads and other unsecure content that folks want to serve as part of the site experience. To fix this problem would require serving ads (and images) via HTTPS, which would require major computing resources and will have a major impact on the web.
According to one security researcher I spoke to this evening (who formerly ran Yahoo mail), there’s no obvious way around this other than to allow both HTTP and HTTPS content to be served from the same site during the same session, something which presently causes an alert to the user (which would have the result of freaking them out). Such an alert is a good thing; turning it off is not a net gain. It shouldn’t be up to the user to have to sort out which resources the site is requesting should be secure and which ones do not need to be.
So, it’s a real dilemma. No one seems to be sure how to really address it other than to eliminate or curb the use of open networks, which is probably where it’s going to end up. So open WiFi is now basically over. Expect places that had been using it to post publicly available WPA passwords, which solves the problem.
October 24th, 2009 — business, design, economics, social media, software, trends
Technology investment bubbles have given many entrepreneurs the impression that success in tech is all about coming up with a “cool idea,” pitching it to a VC, getting funding, building up the business, and then exiting in high style.
First, this is a fairy tale, second, this will not happen to you, and third, what you’re observing is the product of a highly evolved network of peers, of which you are likely not a part.
What Happens in Palo Alto Stays in Palo Alto
What you see taking place in Silicon Valley is the result not of people betting on “cool ideas,” but of people betting on teams and connections. Before every VC deal, there is an exit strategy in mind. Every VC-backed valley startup is an outsourced R&D play.
Ever notice that many large tech firms grow primarily by acquisition? Most have comparatively lean R&D operations; this keeps experimenting off of their balance sheet, thus improving profits and lifting stock prices. Those stock prices are what give them the fuel to make good sized acquisitions, which in turn is the incentive for startups to grow and for VC’s to fund them.
This is the capitalist cycle in its most fully evolved form. Sometimes those acquisitions work out, sometimes they don’t, but the process feeds the machine and it becomes self-perpetuating. This process is literally the grist for the innovation mill that is Silicon Valley.
Why You Should Forget About VC’s — For Now
If you’re not already plugged into this world (meaning you have a lot of contacts there and have a specific idea of a strategy to get funding and an exit before you start), you probably have no place talking about VC’s at all. So ban it from your vocabulary. They’re not interested in you and won’t be. Yet.
Instead, think about how you’re going to build value outside of that network. It is totally possible, but don’t get distracted thinking about VC’s when you should be thinking about bootstrapping and investment from friends, family, and angels.
The good news? Most software startups can be launched for $50K or less these days. Build the minimum viable product, ship it, and then follow lean startup methodologies to iterate towards something that is valuable to the market. Once you have done that, established a revenue stream and can demonstrate some reason why venture capital investment will help you grow fast and capture a market position that you couldn’t capture otherwise, you may be ready to talk to a venture capitalist.
But more likely, investors will come to talk to you! If your startup shows real promise, VC’s will likely seek you out. If you work with some angel investors, they will likely have networks that can help you secure a next round of investment. It will happen naturally. Stop thinking about VC’s. They will find you. Worry instead about building value.
Think Investors, Not VC’s
Yesterday I wrote a post that suggested that entrepreneurs should always think like investors, and always consider what an investor would think of the company. I stand by this, but I am absolutely not talking about VC’s in the early stage. You are not ready for VC’s in the early stage, especially if you are not “plugged in” to the valley culture.
So, think like an investor. Your investors are: you, your family, angels, and possibly local government business development funds. Forget about VC’s for now. If you build value for your yourself, your customers, and your first round of investors, VC’s will come knocking if they think they can help.