Is The Facebook Phenomenon Reaching Its Peak?

Facebook have an average of just over 1 billion monthly users and 680 million who use the app on their smartphones/mobile phones. So the question that must be asked is; how long can they keep expanding and are they near to reaching their peak?

The phenomenon that is Facebook, is “getting old” for many and increasingly people are getting fed up with Facebook. They are trying to introduce new aspects, such as the 20 highlights of 2012 on timeline, but it is it big enough to improve the experience of using Facebook? The core aspect of Facebook is to connect with friends through text, photos, videos and other media; this limits the extent to which Facebook can improve their site once so many people are on board. People are increasingly taking “Facebook Vacations”;  logging off the social network for several weeks at a time to get a break from constant social updates. This would suggest that some people are either no longer satisfied by its offering or are too bombarded by social media and genuinely just want a break. My bet is on a bit of both. Furthermore, Twitter is becoming increasingly popular with the younger generation, with many people now present on both Facebook and Twitter. People are also choosing to spend more time on Twitter than Facebook, but granted this is still likely to be the minority.

Facebook have introduced a bigger array of advertising on the site over the years, which could be a reason for the slowdown in excitement directed towards the Facebook brand. They target their advertising, as many of you will know, at each individual. They do this by scanning the individuals interests and ‘likes’ but also the location they are in, to increase the effectiveness in targeting the right audience with the advertising. It is a clever way of advertising, but do users feel bombarded by the increasing amount of ads? I personally do not, as I don’t mind adverts that are relational, but some may not care or just not want any advertising at all.

The next chapter…

Just under a month ago, Facebook held a press conference to introduce “Graph Search”. It will act like a search engine, but will be far more personal. Graph Search lets the user enter plain-English concepts that tie together multiple things the social network knows about the people who use it; for example, where they live, work, like to socialise. Moreover, it helps the user helps find people, photos, interests and places at a much faster rate. It is only be available to a very small minority at the moment, as it is in the beta stage, but will be rolled out over the year once it is perfected. It is going to make Facebook even easier to use, and much better in terms of finding things the user wants; It could potentially lead to people using Facebook as a searching function instead of a browsing one. This would differentiate it against Twitter.

At the moment, it does seem that the commercialisation of the Facebook brand and the lack of options for future expansion could limit the possibility of further growth at the rate it has achieved over the last 9 years. Although, it would be pretty daft to rule out Mark Zuckerburg to take Facebook to new, exciting places over the next decade, purely due to what he has already created.

It is safe to say that Facebook has not reached its peak, but it is safe to say that it is unlikely that growth will continue at the same rate it has achieved in the last 9 years.

Advertisements

The Power Of Ambush Marketing

Ambush Marketing can be defined as ‘a business advertising at a big public event without paying the sponsorship fees’. London 2012 is the most recent example.

It was fascinating learning of how a few huge brands (Nike, Dr Dre Beats, Paddy Power), who had no official affiliation with the Olympic games, found imaginative ways of getting past the barriers and advertising their products:

Firstly, a few of the athletes during the games wore a Nike green neon shoe. This already stood out, but was made even more visible when runners, the likes of Mo Farah, won Gold in such infatic style. The whole world got a glimpse of this Nike product.  ADIDAS were the official sponsors in this category, but Nike managed to get their product out-there with minimum cost. Secondly, Dr Dre Beats headphones were worn by many of the swimmers just before they were about to race. Panasonic were the official audio sponsors of the games, but the Beats brand claimed that they were not trying to promote their products, just that people liked and wanted to use their headphones. They also coloured their headphones to the colours of the nations competing. This again was a very clever way of marketing their products without paying the sponsorship fees and is likely to lead to an increase in sales. Lastly, Paddy Power; Nicolas Bendtner (Norwegian Footballer) was wearing underwear that had ‘Paddy Power’ written across the top of it and during a game he scored a goal, lifted up his shirt and revealed the brand. He was fined 80,000 euros for this, but it helped the Paddy Power brand reach a global market, which gave the brand greater awareness, enhancing its potential.

These are only three short examples of what happened at London 2012, but it just shows the opportunity these world events can offer huge brands that miss out on being a sponsor, or who do not want to pay the fees. The knock-on effects are mainly positive. They are within their rights to carry out these acts as long as it does not inflict on the sponsorship rights, which in the case of London 2012, these brands did not. So, they get their brand worldwide awareness at far less cost and even better – the public may think that they are officially a part of the games but are actually not, which is the beauty of Ambush Marketing.

Another excellent example is where Southern Electric hoisted a banner on a tower outside the Oval (Cricket Ground) during the last test of the Ashes in 2005. Npower were the official sponsors of the Ashes but Southern Electric were not technically infringing their rights. Ultimately, they paid a very small fee to ‘crash the party’ for Npower, and reach a wide audience at a very low cost.

At London 2012, there were many measures put in place to stop Ambush Marketing occurring. For example, 270 trained trading standards officers were dotted around the Olympic park to try and restrict any Ambush Marketing.  Another example; even the smallest of cafe’s based in London that had been named ‘Olympic’  for many years, had to change their name to ‘lympic’ as it broke the rules. There were many rules set down, but the clever part is how the big brands managed to bypass these rules.

Ambush Marketing cannot fit into a brands marketing communications all of the time due to the rarity of large events, but it is a very powerful tool when the opportunity arises. The big drawback of Ambush Marketing arises when a brand spends more than the sponsor on advertising to compete.

A Suffering UK High-Street

The first 16 days of January 2013 saw three giants of the high-street go into administration; Jessops, HMV and Blockbuster. The most surprising aspect is the fact that Blockbuster lasted as long as they did. The service they provide has been completely squashed due to the rise of internet retailing and borrowing of movies in a digital format.

Jessops was the first business to go under. On January 9th, they decided to shut all 200 stores in the UK. HMV was the next one just under a week later and have in the last few hours been bought by Hilco, who also own HMV Canada. Blockbuster then followed suit 2 days later, with a possible 528 stores to be shut. All these businesses have something distinctly in common; the service they are providing is out-dated with new forms of retailing pushing them out of the market. I believe there are a few main reasons for collapse of these once big players:

Firstly, the rise of the digital world. Consumers have turned to buying a lot of their DVD’s, CD’s, Camera’s and any other electronic products online as it is cheaper, requires less effort and there is more choice. In 2011, people in the UK spent £68 billion online, which caused losses for many high-street retailers, with Amazon being at the forefront of this phenomenon. The rise of online piracy has also massively hit these stores.

Secondly, the increasing power of supermarkets. HMV and Jessops especially have been out-muscled by the likes of Tesco, Asda and Sainsbury’s. They diversified and increased their product portfolios to include many electronic products, often at lower prices. Consumers have to visit a supermarket to get their food shopping and may just go to buy a DVD at the same time, instead of going into the local town to HMV. It is easier for customers to get all their products in one store.

Thirdly, rapid product innovation. The rise of the Tablets and Smartphones has enabled online retailers like Amazon to thrive. It is a lot easier for consumers to download a film straight onto their devices instead of renting or buying a physical copy.

Finally, the long tail. This is where the online retailers have a true advantage over high-street retailers. Amazon, for example, are able to have a vast range of stock of many different products, as they have huge storage warehouses. HMV, Jessops and Blockbuster have not go that option and are only able to offer a limited range of products due to storage and shelf space. It is a lot easier to find exactly what you want on the internet as there are so many more products and options. A customer is much more likely to find exactly what they want online than in store. A greater degree of choice is what customers want.

It can be seen that the internet and the new movement of retailing is what has killed off these once much loved stores; HMV were founded in 1921 and Jessops in 1935 with Blockbuster moving over to the UK from the USA in 1994. There are other factors that have contributed to their collapse; costs of premises on the high street (it is a lot cheaper to sell online) for example. A fascinating point to make is that not all stores on the high-street are having hard times; the John Lewis Partnership announced record sales over the recent festive season, with Waitrose’s sales up 5.4% to over £300 million in the last two weeks of 2012. Halfords are another store doing well, due to the fact that cycling is becoming an increasingly popular means of travel due to the current economic conditions.

It is clear then, that it is especially hard for high-street stores in the electronic sector of the market to survive. It will be very interesting to see what happens to the high-street over the next decade. I would suggest that many of these retailers adapt to the market changes by making strategic changes in order to survive. For example, expanding their online presence and carrying out detailed market research in order to see what the consumers want, which is understandably expensive in the short term, but it could significantly improve long term prospects.

A Missed Opportunity For Microsoft

In late October 2012, Microsoft released ’Windows Phone 8′ coinciding with the launch of Window 8, the latest operating system released by Microsoft. The phone software was introduced to rival other competitors strong market positions in the mobile phone industry; Apple’s iOS and Google’s Android system. The system is being used by Nokia, Samsung and HTC devices, which brings severe competition to Android.

The phone burst onto our televisions with many adverts showing off their phone. Ultimately, the main difference between their system and others is the enlarged ’tiles’ that fill the screen and the fact that it can be customised to anyone’s preference.  However, when I first caught a glimpse of the phone, it did not impress; I did not see how it was better than the iPhone or was more appealing. Many people I have spoken to agree, insisting that the advertising does not serve its purpose; to entice consumers to buy their phone, which is fascinating as the phone seems to be targeted at the younger generations. Instead, I believe that it shows Microsoft lagging behind their main rivals; they should have introduced this system at least 2 years ago if they wanted to develop brand loyalty in the way Apple have managed to, as even though at that time Apple were building in momentum, if Microsoft offered an alternative that matched the iPhone but at a cheaper price they would be at a strong advantage. Now the problem is that many people are hooked on the iPhone or Android phones, making it extremely difficult for Microsoft to build a large customer base. Granted, some consumers may be getting tired of the iPhone and may want to try out the Windows Phone but will it be enough to allow Microsoft to create a more even playing field on the mobile phone market? I have my doubts.

Microsoft have not introduced something completely innovative and new, they have just introduced a similar alternative. If the phone was significantly better than the iPhone or Android phones then I could see it having a impact on the market. The phone has only been out for a few months, so it will be interesting to see whether sales accelerate or whether it is far from the success that Microsoft hope for. The latter is what I have my money on.

Fundamentally, Microsoft have had Windows phones in circulation in the past, but they have never taken off in the way that others brands have. It is a missed opportunity for Microsoft because they have introduced the new phone far too late. The other phone brands have such strong brand loyalty and because the phone is not superior to the latest phones, it makes it even more difficult for the brand to progress. The compatibility with the Windows 8 PC software is clever but it still does not make it stand out as consumers need to have the Windows 8 software, of which many currently do not. Furthermore, it is debatable whether the software is appropriate for Desktops and Laptops, which further hinders its potential.

Starbucks in 2012

Starbucks UK were caught avoiding corporation tax this year, as I’m sure you are all aware of. Tax avoidance is not illegal, unlike tax evasion, but even though they have not broken the law, it has bruised their reputation. BBC Business Corespondent Theo Leggett explains how they have avoided tax; “Much of the money it earns in this country is transferred to a sister company in the Netherlands in the form of royalty payments, leaving the UK division to report regular annual losses”. Corporation tax is set relatively high in the UK, currently at 24%, falling to 23% in 2013 (HMRC) which is the main reason why Starbucks, but also Google and Amazon have been avoiding tax.

The question that I believe needs to be asked is; How much has the tax avoidance affected the customer levels at Starbucks?

Starbucks is my favourite coffee shop and this has not stopped me going. However, they have slightly damaged my perception of the brand which has resulted in visits to Costa. This is the same for some people I have spoken to who are big lovers of Starbucks. From observation, talking to people and doing some research, my theory is that the loyal customers who frequently visit Starbucks have not stopped visiting Starbucks, as they have a love for the coffee and so this ‘unethical’ behaviour is not enough to put them off. The customers that choose Starbucks over Costa or others may have started to put Costa over Starbucks, and the customers that will go to any coffee shop, who do not have loyalty to a chain, may be put off having Starbucks in their list of possible coffee shops to visit. I’ve noticed that the Starbucks stores have had less custom than a few months ago, while the Costa’s I have visited have been flourishing in business. Therefore it is clear that this tax avoidance has affected customer levels, but I am unsure to how much, and whether the tax issues are the sole cause of this drop in customers.

My love for Starbucks was further dampened the last time I visited a store; the service was very bad, resulting in a miss order for one of my family members. This may be a rare occurrence but the store was practically empty at busy lunch time period, with only the truly loyal customers present. A fundamental point I must make is that coffee chains are fairly similar in what they offer, differentiating on taste of the coffee, which is why this unethical behaviour has hit Starbucks, as for some people, the taste of the coffee simply is not enough. It is imperative that they start paying Corporation tax in the UK to regain trust from their customers and potential customers, as Costa are planning on almost doubling their number of outlets due to their continued success.

Starbucks may be the biggest coffee brand in the world, but McDonald’s have superseded Starbucks in becoming the biggest retailers of coffee in the world. Therefore, Starbucks need to push forward in 2013 in order to regain their No.1 position.

What makes an effective leader?

Leadership is a well discussed topic in the world of business, one I am particularly interested in; effective leadership is essential to a successful business. There are various different theories surrounding this topic; the Trait theory, Behavioural theory and the Contingency theory. The Trait theory in my eyes seems the most appropriate measure of effective leadership.

Through carrying out some research, I have identified what I believe to be the 3 most essential qualities of an effective leader:

1. A leader that is driven by an inspiring vision of success. A compelling vision has power. It inspires, clarifies and focuses the work of individuals and preferably entire organizations for a lengthy span of time. Steve Jobs had a vision, and look where he has left Apple today; the 2nd largest brand in the world (Interbrand 2012), with a Market Capitalisation of $493.19 billion (20th December).

2. A leader that has excellent communication skills. A leader must be able to communicate with everyone within an organisation in order to get their vision across. Communication is a fundamental skill that anyone in business needs to possess, but a leader must have it in abundance. Communication breakdown is the downfall of many businesses.

3. A leader that exercises superior judgement. This is the key. A leader must be able to make a decision and stick to it, taking into account the consequences of such a decision. Barack Obama often takes time over his decisions, whereas Angela Merkel (The German Chancellor of the Exchequer) is snappy. Both leaders are successful and well-respected, so a decision can be judged effectively within any space of time.

Think about the effective business leaders of today; Bill Gates, Mark Zuckerberg, Virginia Rommetty, Sheryl Sandburg and so on. They all possess these 3 attributes and it is why they have got to where they are today.

McDonald’s; one of the biggest corporate disasters?

During the 1990’s, a group of 6 activists met together to write a booklet entitled “What’s wrong with McDonald’s”. The publication was full of allegations against the way McDonald’s was handling the different areas of its business, and the effect they were having on the environment. For example; they sell unhealthy food, exploit their workforce and are cruel to animals.

It is clear that a booklet outlining the flaws in McDonald’s would severely damage their reputation, that is, if the whole world became aware of the booklet. McDonald’s decided to sue the activists, of which they all pulled out, apart from 2, Mr Morris and Miss Steel. This could be seen as one of the biggest mistakes the corporate world has seen, a huge error of judgement. Firstly, the case took 7 years to be resolved (the longest in British history) which enabled the book to be translated into 26 languages. Secondly, McDonald’s had to pay in excess of £100 Million in legal fees and even though they won the case, they did not receive any compensation as Morris and Steel did not have any money. Finally, the reason they won the case is because two of the facts in the booklet were found to be untrue, one claiming that McDonald’s was at least partly responsible for destroying the South American rain-forests, which was clearly far-fetched but the fact that the rest of the information was found to be true really harmed McDonald’s.

The fact of the matter is, even though they won the case, the only winners here are the activists. If they had just left the booklet to be distributed around London (where it was created and launched) it is likely that it wouldn’t of had much reach, but instead it was made known to the world due to incredibly bad judgement.

It just goes to show the potential power of a few people and how determination goes along way.

In business terms, this was a disaster for their reputation and brand perception, and even though they are still the 7th biggest brand in the world (Interbrand 2012) it shows that even the biggest corporate and worldwide brand can have its weaknesses. McDonald’s have come along way since this disaster but the blunder is unlikely to be forgotten anytime soon.