In a recent interview about his company’s enterprise collaboration software, Jive Software’s CEO Tony Zingale made a point of saying, “It’s not Facebook for the enterprise, stupid.” Zingale is understandably defensive: many business leaders find it easy to trivialize or ignore Facebook—after all’s it’s just a social network, a community, a club, a waste of time. Most people can get along just fine without it and, despite being recently valued at $50 billion, the company’s current revenue model is still tied to old-school advertising via (somewhat customized) banner ads. Most people would argue that Facebook’s main value proposition for users is voyeurism and the engorgement of ego. In fact, when I told my wife I would be launching into a research project about Facebook, she likened my interest in the site to narcissistic self-gratification. But, Zingale and my wife (sorry hun) are both wrong on this one. With its vast network of connections and hundreds of millions of gigabytes worth of personal information, Facebook has invented a new kind of business. Instead of selling you a product, with Facebook you are the product.
I’m not about to claim that Facebook is “enterprise-grade” software, but there’s a reason why founder Mark Zuckerburg is not only Time Magazine’s Person of the Year, but also the world’s youngest billionaire. At the very least, enterprises should be taking notes. With an estimated 2010 revenue of 1.6 billion, close to 600 million users (approximately 8% of the world’s population), and a keen understanding of both digital identity and the value of open communication, Facebook has fundamentally changed the way people interact and planted the seeds for some extraordinary business models that will disrupt the way companies operate.
In fact, I respectfully challenge Zingale and would like to suggest that Facebook for the enterprise is exactly what we need. Or, more precisely, enterprises and software vendors should look for ways to replicate design lessons from Facebook in their organizations and products. Facebook has been successful because it instantiated (and subsequently mastered) the social graph, built networks of weak ties and strengthened strong ties, customized information management at the user level, filled gaps in elements of customer relationship management, and used personal profiles as platforms for connectivity to third-party sites. While this might sound like jargon to the typical user that derives value from Facebook, please bear with me as I explain why this is important.
For the average Facebook user, these details of how Facebook works and what makes it successful may not matter, but for businesses operating in a socially-connected, online environment, the implications are profound. Aaron Sorkin, writer for the recently released and widely popular movie The Social Network (a docudrama about the origins of Facebook), has been quoted as saying, “I’ve heard of Facebook, in the same way I’ve heard of a carburetor, but if I opened the hood of my car I wouldn’t know how to find it.” While the writer was clearly after the personal drama behind Facebook’s creation, the statement betrays the common lack of understanding behind a technology that has become a daily part of our lives. We wouldn’t chastise a filmmaker making a movie about the origins of the refrigerator for not completely understanding the principles behind refrigeration coils, Freon, or R-12 coolants. But business leaders from that time in the 1930’s and ’40’s would be remiss to not, at least briefly, consider how this advancement in food storage fundamentally changes the way we produce, distribute, and consume food.
Although a fridge is no longer considered “technology,” it altered the way we live and is a fixture of modern-day life that we take for granted—an appliance. Facebook and related social networking technologies are undergoing a similar, although accelerated, maturation. Our children and grandchildren will have the luxury of not knowing or not caring about the technology architecture, social implications, and economic models of sites like Facebook. By then, social networking will be an appliance and dominant design principles will already have been baked into a variety of software, products, and services. But, for companies hoping to capitalize on the opportunities of this trend today, some deeper thinking and understanding is necessary. As part of my research on the topic, I’ve identified a dozen ways in which Facebook has the potential to completely transform business. There are probably more, but I think this is a good start.
Twelve design lessons from Facebook:
- An explicit statement of the social graph. Facebook’s greatest achievement has been taking an abstract web of relationships and making it tangible. By contrast, most organizations still operate using implicit networks that are informal or hidden. For example consider the difference between the org chart and “how work actually gets done” in your company. By digitizing these networks and making them explicit as Facebook has done, companies can identify and reward influencers, key groups, and nodes of value creation. For a really cool visualization of your personal social graph on Facebook, check out the recently updated Friend Wheel app. If LinkedIn’s more you thing, there’s also LinkedIn Maps, which has some added functionality for professionals. Simply providing the ability to automatically map and visualize networks of personal relationships is something that was not possible even a decade ago.
- Creating ambient intimacy. Many companies tend to focus on collaboration amongst networks of colleagues or project teams to improve decision-making (we can think of these as “strong tie” relationships). However, significant untapped opportunity lies in also creating bridges that carry ideas and innovations between different networks, both within companies and outside of them. Bridges—like those created by connecting on sites like Facebook, Twitter, and LinkedIn—help solve problems, gather information, and share new ideas. Even small tidbits of information impart emotional and social content that contributes to our digital identities and sustains what we call “weak tie” relationships (i.e. see Mark Granovetter, “The Strength of Weak Ties: A Network Theory Revisited“). Although one Time Magazine reporter recently equated Facebook’s sprawl of weak tie relationships to “the social equivalent of liver failure” at the individual level, companies can benefit directly from greater connectivity, information fluidity, transparency, and robust alumni networks.
- A social catalyst. Facebook provides individuals with what one of my colleagues deemed “Personal Relationship Management” functionality—Facebook has become the de-facto social intermediary for sending someone a message, meeting up, and planning a party. Much like the central square in European cities or the water cooler in office buildings, Facebook serves an important function as a social gathering place for exchanging gossip, ideas, and anecdotes about last weekend’s events. Not only is the “digital water cooler” superior for connecting geographically-dispersed individuals, but Facebook also logs all of these social interactions and organizes relationships, events, and messages in a way that is meaningful for the user (for an example, check out Facebook’s recent Friendship Pages).
- The objectification of people. For good and bad, Facebook has objectified people through the use of templates and forms. In his book, “You Are Not a Gadget,” Jaron Lanier talks about how it can be dangerously reductive to make people quantify complex things like relationships and identity. As Lanier points out, by “organizing people into multiple-choice identities,” Facebook has effectively removed the “flavor of personhood” from the internet. In a sense, this is true: A Facebook profile, no matter how rich, will never capture all the nuances of someone’s real life. As a result, our online selves are bottlenecked by technical expediency that reduces all information to something that’s easily stored in a database. This is important to remember as we try to port elements of human empathy (and creativity) to internet culture. However, from a marketing standpoint, the objectification of people can be very valuable, giving companies a tremendous amount of structured data that can be used for modeling, simulations, and conduct other types of behavioral analysis.
- The new currency of profiles. Users are increasingly reluctant to duplicate rich digital profiles in multiple places, and companies shouldn’t ask them to do so. Companies that wish to leverage profile information for personalization benefit from established, detailed, and authenticated profiles over more anemic ones that are created for one-off initiatives. Assuming granular control of profile elements and privacy, customers also benefit—rich profile data is valuable to companies and can be exchanged for access to events, information, customization, rewards, or other benefits. Facebook’ Connect service already makes profiles and associated social graph data foundational elements for a wide range of other activities (currently over 2.5 million web sites integrate with Facebook and this number is growing at a rate of about 10,000 new sites per day). Facebook Places also plays a key role, as “logging in” via a profile does not have to be a web-centric activity and will increasingly occur in physical locations as well via mobile check-in services.
- Personalization and manufactured serendipity. Explicit relationships and the objectification of people hold tremendous potential for personalization. One reason people spend so much time on Facebook (approximately 23 hours per month per active user) is because it’s perfectly tailored to them: based on user behavior and privacy settings, Facebook learns which friends are more important and therefore which updates should be highlighted in your custom News Feed. Even if you share similar friends, two users will never have the same experience. Facebook and LinkedIn also do a reasonably good job of predicting the “people you may know” by analyzing the commonalities in two people’s social networks. Similar methods of taste modeling and “collaborative filtering” are used to recommend products and services by sites like Amazon, Netflix, Yelp!, and others. This type of functionality married with location data provides companies with the ability to have highly-personalized, context-specific interactions with customers and employees (e.g. see my post from last year, “What you need, when you need it: How context-aware machines will change how we access information“).
- The Facebook Times as newspaper of record. Sites like Facebook and Twitter are not only social networks they are information networks that point to a change in the way we consume content: First, our information filter has changed from an editorial one to one based on our social graph of trusted relationships. We’re increasingly interested in what our friends (or selected peers) are interested in, rather than what one editor deems to be relevant. This shift has been underway for many years. Second, the notion of presenting information via static web pages, documents, and file folders is slowly being supplanted by information that flows continuously via streams. From a user perspective, we no longer look for information, information finds us. This shift is profound and will affect many enterprise functions, from basic data storage and retrieval to corporate strategy, which will also become more continuous and agile. Thought leaders like Kevin Kelly suggest that the shift to visual streams of data will even change how humans develop and learn. Until then, stop-gap initiatives like paper.li turn streamed content from your social graph on Twitter into something more comfortable like a newspaper.
- Market research. Several years ago, Facebook launched a service called Lexicon which allowed any user to graph the popularity of key words by scrapping data from Wall posts across the entire social networking site. Although Lexicon no longer exists publicly, it’s clear that Facebook continues to offer similar analytic services to owners of fan pages, advertisers, and platform developers. What we’re seeing is a new kind of market research. Using social media monitoring tools, companies analyze vast amounts of “information exhaust” (i.e. aggregated and anonymized user comments and status updates) from sites like Facebook and Twitter to track positive and negative comments towards their products and services, derive the underlying cause of sentiments, measure the impact of marketing campaigns, guide product development, and assess the sentiment toward competitors—in many cases for free or at a very low cost.
- The personification of objects. Tools like Twitter and Facebook have flattened the distinctions between people, enterprises, and brands. Prior to social media, the relationship an individual had with a product or brand was limited to consumption and perhaps commentary. Now, people can become “friends” with a brand and they can have a conversation with a company. Facebook presents unique opportunities for companies too, as they now have the ability to create profiles, collect friends, subscribe to feeds, broadcast their preferences and mood, and generate a social graph of relationships and affiliations. Companies can exhibit personalities and build more trusted relationships with people who opt-in to receive communication from brands in the same way they do from other people. For enterprises, this means a level of customer engagement that was not possible before. It also means a much more efficient use of marketing spending directed toward a captive audience (see Denis Hancock’s thoughts on The Incredibly Shrinking Marcom Expense Line
here and here).
- Social CRM provider. As I said before, on Facebook, you are the product. The average Facebook user “Likes” nine pieces of content very month. With 600 million users worldwide, this translates to about 5.4 billion Likes per month and 65 billion Likes per year on everything from news articles, to jeans, to movies, and even real-live activities and events. For each of these Likes, Facebook is able to tie a product affiliation to demographic information such as sex, age, geography, and education, as well as social graph data about relationships and influence within a group. With Places, Facebook can even correlate product activity to location data. In the future, they could get actual sales data as well. What Facebook has developed behind the scenes is a huge database for modeling user preferences and tastes across a wide range of content types, brands, and social connections. Although this data (and the analytics applied to it) has yet to be monetized, it could become the basis for Facebook’s core revenue model as the world’s largest provider of social CRM (see my earlier post, “Will Facebook be your CRM provider?“).
- A new kind of financial services company. What if Facebook becomes a bank, or a payment solution? In 2008, the Chinese social networking platform Tencent’s virtual Q-Coin currency was so popular in the black market that the Chinese government became concerned it might undermine the value of RMB and levied a tax on virtual currencies. By 2009, China went a step further and banned the trading of virtual currency for physical goods altogether. With approximately the same number of registered users as Tencent’s QQ service, Facebook could face similar challenges (and opportunities) should users adopt Facebook Credits broadly. Combining check-in data (i.e. Facebook Places) with “mobile wallet” technology on smart phones is another avenue by which the social graph will start penetrating payment systems. As it does, it will impact companies in several ways. First, linking online profiles (behaviors, as well as product ratings and comments) to physical purchases allows companies to better calculate the ROI of social media. Second, linking profiles to financial metrics will fundamentally change how financial services companies assess risk for things like credit scores, insurance premiums, and new products and services.
- The internet as walled garden. Users want simplicity and ease of use, and successful internet companies like Facebook, Apple, and Blogger deliver. While KISS (Keep It Simple, Stupid) provides a good user experience for the majority, it can also stifle creativity, disempower geeks and prosumers, and create technology lock-in (see my argument: “Apple’s apps | Google’s web: What is the future of the internet?“). Facebook, like Apple, represents the next generation of media oligopolies that use lock-in to create opportunities for monetization on proprietary platforms. Simply put, Facebook hopes that all online interactions will be mediated through user profiles and leverage social graph capabilities. In this way, Facebook can control the user experience, deliver ads and other content, and capture data as it passes through the Facebook platform.
Still think companies can ignore Facebook? Chime-in in the comments section and let me know what you think.