Facebook is driven by relationships. Real relationships.

I say this to differentiate between the friends we have merely for stalkerish purposes, and those we meaningfully interact with. This differentiation is crucial to Facebook’s overall level of activity.

Take a look at your own wall and message feeds. We’re talking to the same people over, and over, and over again. For me, 99% of my Facebook activity is generated through interaction with ~15 of my 650 friends. I assume this is true for most other users.

In other words, 99% of the activity on Facebook – the stuff they track and use to create the products they sell to generate revenue  -  is caused by only a handful of existing “friend” relationships.

Taking the “average” Facebook user’s stat of 130 friends, we can guesstimate that the relationships with ~10% of a given user’s friends generate 99% of their activity.

So, want to kill Facebook? Steal the relationships.

Take the relationships and you take the meaningful activity. Take the activity and you’re left with ineffective advertising products. These no one wants to buy, and so revenue nosedives.

Google realized this with their launch of G+, but I’m not sure to what extent. If they’d been truly serious about beating Facebook they’d have had the balls to focus on the human bonds involved. Instead, they released a social network that is arguably just another suite of productivity tools.

I want to see something limit friends to friends. Force me to do it, for I – and countless others – are not strong enough on our own. Make 25 or 50 relationships the maximum. Then let something grow that’s build on positive emotion, rather than stalkerish he-said-she-said anxiety.

By nature we operate in small groups and are extremely selective of who we grant trust to. It’d be fantastic to experience a web app that forced us to be as candid online, as we are organically in person.

“South”, © Steve McLoughlin

The Humanized Net

“It is change, continuing change, inevitable change that is the dominant factor in society today. No sensible decision can be made any longer without taking into account not only the world as it is, but the world as it will be.” – Isaac Asimov

Like everything on Earth, the Internet is a living thing – constantly changing as those interacting with it treat it in different ways, and employ it for new purposes. “Web 3.0” is the term used to mark the next stage of this change – think of it as the “Iron Age” of the Internet. Before we delve into that, however, here’s a little background on Web 1.0 & 2.0.

Briefly, Web 1.0 can be defined as the “first stage” of the Internet’s evolution, wherein sites were bonded to hyperlinks, and the WWW was released to the public (in 1993). In a word, we could say that Web 1.0 stands for connection – between sites and links, and between users and the net. The second stage, Web 2.0, has been defined by collaboration. As the number of connections between sites, users, and software exploded, applications and sites began interfacing (sharing data), design became user-centric, and mass information was achieved via content generated by users interacting together through social media. So, connection, collaboration – then what? What’s Web 3.0 going to be about?

Context.

Our world is saturated by content. Think about it. Everywhere you look there’s something trying to grab your attention and direct you towards an offer, video, tweet, update or article (guilty as charged). On top of this, the line between our online and offline worlds is rapidly blurring towards a point of homogeneity. Soon, we’ll be unable to stop a constant flow of information from crashing through our lives (it’s already happening).

Now, I have no doubt that the Internet will change us - heck, it already has. But, what I’m really interested in – what keeps me up at night – is  how we will change the Internet. In one of my previous posts – The Personal rEvolution – I wrote about dynamic filters being created, which personalize this stream of content for every individual. You’ve already experienced this, to a certain degree, every time you run a search on Google – think your results are the same as everyone else’s? Think again (most know this, some don’t). What all of these filters have in common, however, is context. Human context. This is the defining feature of Web 3.0.

We are symbiotically tied to the Net: we use it every day, and have deeply incorporated it into our lives. Thus the logical “next step” in its evolution, is for it to begin taking on characteristics of our patterns of communication. This is already happening.

A. We communicate most frequently in person, and over 90% of the total “communication” that occurs in an interaction, comes from what we perceive in body language and tone of voice. Is it coincidence, then, that the 3rd most trafficked site ever is YouTube, or that over 650 million people use Skype to connect with friends?

B. We are social animals. Guess who just passed 700 million users? That’s right – Facebook. It also serves one third of all online ads, and use is conservatively (!) averaged at 25 minutes per user, per day. It’s a huge part of the Web.

C. Human being tend to converse in short bursts, rather than long speeches. That’s just the way we talk. So yea, I’m bringing up Twitter – which averaged 3000 tweets per second on May 1st (during Obama’s “we’ve got him” speech).

How do I explain all this. Well, there’s a great quote, by Fast Company co-founder Alan Webber, that – I believe – perfectly summarizes the whole trend: “Content is a commodity. Context creates value.” I.e. In order for what I say to you, and to the world, to have any value, it’s got to be imbued with context.

Below are the 8 ways it’s currently being done (with examples):

A. Location

• FourSquare - let your friends know where you are.
• Voxy – learn a language based on your surroundings. In a restaurant – it’ll give you food vocabulary.
• Twitter – now offers location-based tweets.

B. Photographs

• Instagram – take photos with cool filters that add emotionality.
• TwitPic – the original photo-sharing tool for Twitter.
• Facebook Photos – the largest repository of photographs ever (100 million+ uploaded every day).

C. Video

• YouTube – 2 billion views a day. 24 hours of video uploaded every minute.
• Vimeo – high-definition video is more realistic than low-definition video.
• Skype – talk in person (sort of) online.

D. Audio

• iTunes – music on more computers than you can count.
• Soundtracking – share the “soundtrack of your life” on Twitter.
• Qwiki – think Google meets Wikipedia with sound and pictures. Basically the definition of ‘contextual search’.

E. Social

• Facebook – ’nuff said.
• Twitter – the world learned that Osama bin Laden was dead on Twitter.
• LinkedIn – context: professional.

F. Limitation

• Twitter – only 140 characters makes you speak more naturally.
• Tumblr – people don’t like reading long blog posts – keep ‘em short.
• Tubechop – think clippings of YouTube videos.

G. Timing

• Byliner - ebooks on breaking news (Three Cups of Deceit anyone?)
• Twitter – real time everything.
• Facebook & Twitter advertising (boo) – ads pop up in real-time based on what you’ve typed to friends, or set as your status.

H. Interests

• Google – we all know what Google does.
• Xydo - it curates your news for you based on preferences, and sends you 1 email per day with the most relevant/popular articles.
• Quora – the place to go to ask questions you’re interested in getting legitimate answers for (because everyone tells you who they are).

So, Monday was an interesting day.

Google announced that it had reached a firm deal to acquire Motorola Mobility for $12.5 billion in cash: a 60% premium of $40 per share), with a $2.5 billion insurance plug in place for Motorola should FTC approval prove non-existent and the deal go south. Google’s motivations in this deal have already been discussed ad nauseam all over the damn place. My healthy appetite for wit and pithy one-liners makes MG Siegler’s piece my favourite. So – before launching into the conspiracy theory at the heart of this article – I’ll provide only a cursory review of the situation.

If you find yourself wanting a deeper analysis before continuing, and are also fond of pithy sarcasm, I suggest visiting the link above and placing your tray tables and seat-backs in their upright and locked positions.

Situation (skip it if you already know what happened)

Google has always “taken the high road” when it comes to patent protection; meaning that, in the land of Microsoft, Apple, and Oracle – which all have aggressive IP strategies – Google uses its own for strictly “defensive” purposes. Recently, however, their high-mindedness has caught up with them. They’ve been facing increasing legal pressure on their Android OS, and have been unable to shore up their defences through purchase of additional patents. Their last chance evaporated a few weeks ago, when a consortium of Microsoft, Apple, RIM and others, bought a trove of 7,000 Nortel patents in an exciting high-stakes auction.

Around the same time as the auction was beginning, Google got wind that Motorola (which has over 17,000 patents, and 25,000 pending) was in acquisition talks with various parties including Microsoft. So, when Apple and the Microsoft-led-consortium broadsided Google’s auction ship, and swiped the 7,000 defensive patents GOOG was confident about getting, Larry Page’s only choice was to go on the offensive and outbid Microsoft for Motorola. Which it did.

Assuming the FTC clears the acquisition, Google will find that it’s grown an unseemly anchor where its ass once was: employee numbers will double – Motorola has 19,000 -, net income will decline – Motorola lost money last quarter on revenues of $3 billion-, and it will have placed itself in direct competition with partners Samsung and HTC. Oh yea, and in addition to decreased income and the logistical nightmare of absorbing a hardware business, Google will have lost a third of its $36 billion cash reserves.

So you see, it’s one thing to own 10s of thousands of patents and not be belligerent with them, but when you own less than 2,000 while your largest competitors (Microsoft and Apple) have around 20,000 and 10,000 respectively, principled idealism becomes imprudent naïveté.

Conspiracy Theory

Okay, now for the conspiracy theory.

Microsoft engineered this whole damn thing from the beginning, and if that’s true, then this is possibly the most brilliant strategic maneuver in the history of the technology industry.

Microsoft’s position in the smartphone marketplace is weak, and Google’s is strong: Android devices made up 48% of all smartphones shipped in the second quarter of this year, while Microsoft devices accounted for only 1.6%. So how does Microsoft, which is partnered with Nokia, compete against Google – with its powerful OS and strong partner OEMs?

Transform Google into a company that it can compete with. How?

The past 5 years have seen Microsoft dramatically increase the size and scope of its IP holdings. Between 2009 and 2011 alone, its patent assents doubled and its portfolio’s strength rose to a first-overall ranking according to the  IEEE. While amassing this IP-trove, it began attacking Samsung, HTC, and Motorola – three key providers of Android-smartphones.

A. In April of last year, while HTC was being sued by Apple, Microsoft reached a licensing deal with them, providing the Taiwanese company with “the right to use Microsoft’s patented technologies in phones running Google’s Android Operating System.” Essentially, Microsoft lent HTC IP support in their legal battle with Apple, which was contingent upon their paying out royalties.

B. Six months later, in October of 2010, Microsoft sued Motorola over their use of “Microsoft patented technology in phones running Google’s Android OS.” Motorola has countersued but, hm, isn’t that an interesting similarity…

C. This July, just after the close of the Nortel auction, Microsoft put the screws in the key GOOG OEM by placing licensing pressure on Samsung. The company is currently trying to negotiate a lower royalty fee than the $15 per Android phone demanded by Microsoft – hardly a positive attitude.

Note on strategy at play: Margins are tight in the mobile phone business, and by implanting licensing fees on Android devices, Microsoft aims to squeeze the net income of GOOG’s key OEM’s – forcing them to become interested in a Windows 7 operating system.

Google, meanwhile, realizing the need to beef up its IP shield, buys 1,000 patents off IBM, and then makes the stalking horse bid at the Nortel auction. For its plan to work, Microsoft knows it has to prevent GOOG’s acquisition of these patents, and in an awesome feint, drops out of the auction only to team up with Apple and win the patents.

Months prior to its play in the auction, Microsoft has used its legal stance as leverage and approached Motorola re: acquisition – knowing that Google will find out (presumably through Bill Hambrecht – the legendary banker who engineered the Google IPO, and who sits on Motorola’s board), and be forced to acquire the company after it loses out on the Nortel patents.

All goes according to plan, and Google is forced to acquire Motorola after losing the Nortel patents – bloating the company, reducing net income, eliminating 1/3 of its cash reserves, and placing it in direct competition with its already squeezed OEM partners. Microsoft has gained the opportunity it planned for:

“Investing in a broad and truly open mobile ecosystem is important for the industry and consumers alike, and Windows Phone is now the only platform that does so for all partners.” – Andy Lees, President Windows Phone Division

Man, now doesn’t that sound like someone from a company that engineered this all along…and is fairly happy with how things are unfolding?

Update: Bill Hambrecht has since resigned from Motorola’s board, and Stephen Elop – CEO of Nokia (in Microsoft’s pocket) has spoken out against Apple saying “If I happened to be someone who was an Android manufacturer or an operator, or anyone with a stake in that environment, I would be picking up my phone and calling certain executives at Google and say ‘I see signs of danger ahead.’” How very interesting
.

Magna Carta

While fast food outlets may be a sore subject for many (including my mom, who’s a health nut), changing up Burger King’s brand story is interesting to me for two reasons: 1. they really need it, 2. because if this actually happened the commercials would be awesome.

Here’s the situation, Burger King is not in a happy place right now. Operating within the Fast Food Hamburger (FFHR) segment of the $59 billion Quick Service Industry (QSR), the company has more than 11,000 restaurants worldwide, annual revenue of just over $2.5 billion, and sees a net income of about $200 million. By contrast, it’s “biggest competitor” – McDonald’s – sees 10X more revenues, and 22.5X more net income, from only 3X as many locations. WTF!? Build it and they will come, right? Not so much.

Burger’s King’s real biggest competitors (among hamburger joints at least), are Jack in the Box and Wendy’s. The former of which generates revenues of just $65 million less, from only 2,200 stores – 5X fewer locations! To top it off, (with a double whammy) A. rising agricultural commodity prices, and fierce competition from other QSR companies are squeezing Burger King’s margins; B. the high unemployment rate in this economic climate has a disproportionally large effect on their greatest source of revenue, young men. To me, this seems like a convergence of all the wrong forces.

Now, to check the dreary portrait I’ve drawn, let’s take a look at a few redeeming points.

1. QSR companies tend to do well in recessions, thanks to lower food prices, fast serving times, and the scarcity of free time for those working several jobs.

2. 90% of locations are franchised, meaning low overhead for expansion.

3. BK has more net income than Wendy’s or Jack in the Box.

4. They’re experiencing solid international growth (particularly in Latin America).

Right time, right place, and money in hand – that sounds like an opportunity. I say come out swinging. And in a marketplace of near-equal pricing and products, the way to do that is brand. Annihilate other restaurants’ stories with your own. Here’s how I’d do it.

–

You are the Burger King. Start acting like it. Right now, I think of BK as a shabbier version of McDonald’s – I want to see an aura of majesty that differentiates the two!

1. Novelty drives fast food sales. Introduce new products under the theme of royalty. Think The Royale burger, The Prince, The Fool, The Grand Duke. Crazy fun stuff like that.

2. Epic commercials. Think a less creepy, vicious regent version of the most interesting man in the world.

3. Touring limited time offers. When royals come for a visit, they don’t stay for a long time, and hundreds of thousands show up accordingly. Imagine a “Baron Burger” royal tour of the midwest, stopping in certain regions for two weeks at a time, set up with a concurrent advertising campaign targeting university campuses.

Change isn’t always good, but it does always catch peoples’ attention. When you have a brand with potential, and a matching opportunity, you’ve got to know – concisely – what you want for the future, and narrow your focus for getting it done down to one resounding line.

Behold the King.

Pre-historic

In Canada, BCE stands for both Before Common Era, and Bell Canada Enterprises – the country’s “leading communications company.” Now, I know this brings the same question into all of our minds: how does Wilma expect to hear anything from the closed end of that conch shell? Answer, (the Daily Double) she doesn’t.

You see, BCE and BCE have something in common; in the minds of the public familiar with them, they mean exactly the same thing – outdated, and out of touch. However, whereas Before Common Era was given its definition by Webster, Bell built its own, one vexing interaction and dismal story at a time.

Bell needs to change minds. Here are 3 1/2 ways they could improve their brand by giving customers terrific stories to tell.

1. Change begins within. With thousands of Bell jobs being outsourced to the Philippines, I’d bet that the reigning atmosphere is one of fear, and distrust. How well will a customer be treated, if an employee is distracted by the thought of losing her job? Change this climate by putting faith in the employees you have, and letting them know it. Reduce outsourcing, and approach the people who make up your company (not just union executives).

2. Communicate. Ever gone to Bell.ca, or called up customer service, to try and fix a problem? I have. A “leading communications company” should kick-ass at communicating with its customers, and Bell doesn’t. Two ideas:

a. Set up a branded YouTube channel that provides how-to videos for solving common problems. This would be way better than the current online support offering.

b. Create customer service “peer groups”, comprised of 5-10 employees of varying skill levels. Have them teach each other the fixes they’ve learned on the job, and watch technical support issues vaporize.

3. Surprise us. Imagine this: a Bell smartphone user has been working hard all day – texting, calling, and emailing customers and colleagues. Suddenly, she receives a reward! A 2 for 1 gift certificate for the movies (scannable off of the phone of course). She’d have a pretty awesome story to tell her friends after that.

3. 1/2 Get out of the stone age and cancel touchtone fees.

Every customer has a story to tell about your company. Decide what kind you want it to be, and treat them in a way that makes it so.

“Touch”, © Steve McLoughlin

Acta non verba

Everyone has a story. And each of us – individuals, groups, and companies – tell ours to those around us with each new interaction. These interactions result in experiences that form the nuclei of stories about us, which in turn build reputation, identity, and brand. And brand drives value.

Right now, America’s value has been jeopardized because of a story. It’s a complicated one, and I run the risk of simplifying its details here, but the gist is this: in the face of global economic collapse – “armageddon” as many economists have put it -, the U.S. government managed a solution just 1 month, 1 week, 1 day  before crisis struck. In fact, at this point, it’s really too soon to know if one has been avoided. The theme of this story is doubt, and it has been sown in the minds of America’s customers: the banks, nations, corporations, and individuals who hold its debt. Now let me ask you a question: If you went onto store.anybusiness.com and doubted that your purchase would arrive in the mail, would you buy it in the first place? Stories are powerful.

This week, I’m going to be chronicling a few companies who need to change the stories they’re telling us. After all, to change the world you need only change minds.