FreshNetworks Blog

There is a concept in macroeconomics called ‘perfect information‘. In brief (and apologies for missing many details of the theory and debate for a non-specialist audience), this would say that if all consumers know all things, about all products, at all times, then they will choose the best one for them. Taken to its conclusion, this theory would say that the best products would get the highest sales; and conversely the worst products would get no sales. The best products would survive, because they are the best.

Traditionally, in any purchase, the consumer does not have perfect information at all. Buying a TV, for example, there was no way that they can know all things about all products. Their selection was immediately reduced to the ones a particular store had chosen to stock (so they were not even exposed to all products), they got most of their information from either what the manufacturer or the salesperson chooses to highlight (and so they were in control of the information that is known) and, critically, they did not know about future products that might be just about to come out. The power in this sales relationship lies with the manufacturer and the salesperson, and not the consumer.

Of course, there have been many ways that this ‘information asymmetry‘ can be rebalanced. Organisations such as Which? in the UK have long published detailed reviews and analyses of products. As competition in the market grows, consumers have access to more stores in their towns and online that stock more products for them to compare against. But they are still limited by the products they are able to find (and then buy) and in most cases by the information the manufacturers and salespeople choose to release about their product.

Social media has changed this, or at least many would say has the potential to change this. Reviews, the ability to find other people with a product, and the ability to share images, videos and discussions have flooded the market with information from consumers and for consumers. The manufacturers and salespeople have lost some of their advantage and the information asymmetry is yet again rebalanced a little.

But, will all this extra information flooding the market lead to consumers knowing about all products that exist, knowing all information about these, and having this information to hand when they want it? Will social media lead to perfect information in the consumer market?

It is tempting to claim that it will do. Tempting to claim that social media is bringing a revolution in consumer information that will put consumers on an equal footing with manufacturers, salespeople (and marketers). Tempting to claim that social media will lead to only the best products surviving in the market. But this is unlikely to be the case.

What is happening is actually confusing the picture even more than it was before. In the traditional example above, it was clear that the manufacturer and salesperson had more information than the consumer, and everybody knew that. Social media has not led to perfect information, but rather has made things less clear.

Now the consumer does have more information, that is clear and is evidenced in their changing purchasing behaviour. It is marked in some markets (notably hotels with the likes of Tripadvisor) than others, but this extra information is coming and is changing markets. However, this information is not perfect – the consumer still does not know everything about every product – social media is creating two bigger issues with this information:

1. Access to information. The real challenge with all this extra information in the market is the ability for consumers to search for, sort through and find the information they want. As more and more information is out there, tools and organisations that facilitate this will become more important and more valuable.
2. Information accuracy. The problem with many reviews and other information in social media is that there is no way that we can 100% assure its accuracy. Often this doesn’t matter – we use it to help inform a decision and use our best judgement to decide on the accuracy. But perfect information relies on the information we have about a product being accurate. As has been seen (again with many Tripadvisor reviews), this cannot be relied upon.

So social media is certainly flooding the market with information. It is definitely rebalancing the information asymmetry between the manufactures / salespeople and the consumer. And it is evidently changing consumer behaviour and making brands change and behave differently too.

But is social media leading to perfect information? No. It is muddying the waters. Perhaps the biggest danger (or advantage – depending on the point of view you are looking at this from) is that social media is leading consumers to think they have all the information and are making the best choices of the best products because of this. When in reality they may be getting closer to this state, but they are not there yet and will probably never get there.

From SXSW to new apps on the scene, this month has seen another big month for social media. Let’s take a look at our what’s hot in social media round-up for March 2012…

Charity and social media

The beginning of March saw a host of charities using International Women’s Day on 8^th as an opportunity to do something interesting in social. One of the most striking examples was Bollock’s to Poverty’s Facebook app which turns your timeline into that of an oppressed 1950’s housewife to highlight gender inequality issues.

Another charitable issue which came to light in March was the hotly debated Kony 2012 video from Invisible Children. If you’re one of the last people on earth not to watch it (over 86 million people have watched it on Youtube) the video is about raising public awareness of Joseph Kony, who is head of guerrilla group, the LRA in Uganda. Despite being a complex issue, this campaign has simply mushroomed in a way which other marketers could only dream of for their brands.

Social entertainment

On a lighter note, March saw the explosion of ‘Draw Something’, the app ‘du jour’. With a staggering 35 million downloads and a billion drawings a week, this Pictionary-style app has been making hundreds of thousands of pounds from in-app adverts per day. No surprise then, that social gaming powerhouse Zynga has just bought OMGPOP, the creators behind ‘Draw Something’ for a cool £113 million.

Meanwhile, social TV has been gaining traction in the UK with Social TV app Zeebox seeing a strong increase in user numbers following a TV advertising campaign, supported by BSkyB’s recent investment in the company.

Pinterest

This month the buzz around Pinterest has continued. British airline BMI has launched what could be Pinterest’s first lottery by encouraging fans to re-pin images from popular holiday destinations for the chance to win free flights. Pinterest itself has been suffering the common annoyances that come with popularity – clones and spammers. Take a look at this site for example – look familiar at all?

Finally, this month sees the launch of Facebook’s full screen photo viewer and the changeover for brands from pages to timeline is anticipated tomorrow. Are you ready?

The Information Commissioner’s Office in the UK has warned employers not to ask for the Facebook username and log-in details of their staff or of people who apply for jobs. That this even has to be ruled on will come as a surprise to many – I wouldn’t expect to give my employers access to my house, or to my diary or to my holiday photos. But apparently some employers in the UK (but more in the US) have been asking for this data so that they can get an understanding of a candidate before they hire them, or of an employee they have working for them.

That this is being done, or even being talked about, reinforces the negative attitude there can be to social media in many organisations and in many recruitment processes. At its worst, it is a way to spy on people and something that should be banned from all workplaces and all workplace activities. This is clearly wrong.

Rather than banning social media or turning into a tool that is used to spy on employees, organisations should be encouraging and educating them to use social media to support their work and to support the brand they work for. A more restrictive attitude to social media is most likely to lead to a lack of respect of the medium and, potentially, of the brand you work for in that medium.

For many leaders and managers, social media can feel scary and like the unknown – there are new channels and networks and tools all the time, and the chances are others in your organisation will be more knowledgeable about them. The openness and sharing that social media enables is new to us all and is very different to the way that most businesses and managers have been used to. And for many there is a real concern that social media is about chat with friends and so it is wasting time in the workplace. None of these areas should lead to restrictive policies on social media, rather they should lead to training, sharing and education so that businesses can use social media in the most effective way.

The most successful businesses, and those that are set to make the greatest advantage from social media are those with a clear programme of training and educating staff about how the brand, and how they as individuals, can use social media. Both for personal reasons and for the brand. The line between the two is drawn, employees understand how and where social media can help them at work and so understand what kind of usage is acceptable.

For example, you might not want one of your sales team to be spending an hour chatting to a friend on Facebook. You might, however, love them to spend this time building initial relationships and credibility with contacts across a target segment or sector. You equally wouldn’t want one of your concierge or front of house teams in a hotel looking at YouTube videos for an hour, you probably would like to spend downtime searching for new places and tips in their city through YouTube or Foursquare so that they can better advise your clients.

Social media can help people to do their jobs more effectively and more easily – helping you to find people, find information, find solutions and learn things. At a conference in Cambridge last week, this was summed up most effectively for me by Charles Elvin, the CEO of the Institute of Leadership & Management in the UK:

Employees need to be constantly learning to help them and to help their employer; and social media is the best way of them doing this

To make the most of this, employers need to take responsibility for training their staff. The true social business has a process of training and educating all staff about social media, how they can use it, how they should use it for work and what they should not do. They may go on to train employees about how the brand uses social media and how they can contribute.

Social media offers many great opportunities for brands and for their employees to be more efficient and do things in new ways. Most people need support and training to make the most of this and it is this that should be put in place, not restrictive policies behaviours.

In the UK this morning many commuters would have read a piece in The Metro about whether Pinterest is the next Facebook. This is not the first article or blog post about this, and I fear that it will not be the last. The short answer to this is ‘no’. And the longer answer is ‘no, because they are fundamentally different, non-competitive things’. But the fact that the question is asked and written about is a reminder that there is still a misconception that ‘social media’ is a single type of thing rather than a set of different, often complementary tools.

Pinterest is certainly the latest social platform that people are talking about. There’s a range of great statistics on DesignTAXI and there has been a lot of coverage about how they monetise your content. The concept is very simple – a social tool that lets you gather and share images, and sort them into collections. It offers something that really wasn’t that easy to do before online – although like many social tools it mirrors an existing offline behaviour (putting things on pinboards or in scrapbooks).

There is very little in this description that is like Facebook at all. In fact it offers a tool that is not really part of Facebook’s repertoire - in fact can you imagine creating these collections in such a simple easy way on Facebook? That’s partly why Pinterest is getting such early success (and why I expect it to continue growing). Not because it is competing with Facebook (or becoming ‘the next Facebook’). But because it offers something new and different to what was previously available in Facebook or across any other social tools.

The fact that people compare the two highlights that many consider social media tools to essentially be doing the same thing (they’re where people ‘do social media’). So if a new one comes along it must threaten the existence of the previous tools. This is a fundamentally flawed understanding.

1. Different tools do different things and we use them in different ways – Facebook is a collection of tools (a photo sharing tool, an event planning tool, a status updating tool…to name but a few). When a new tool comes along it probably adds to the mix of things we can do rather than competing directly. We all know that there are some things Twitter, or Facebook, or YouTube (or any tool) just isn’t suited for and so a gap that could be filled.
2. Our total mass of ‘doing social media’ has not peaked – If a new tool comes along it does not have to take a share of our ‘social media time’. We have not yet reached saturation, and indeed we may never as new tools will help us do other things differently or more efficiently. For any new tools to be a ‘Facebook killer’ suggests that it is going to compete for our time or attention that would previously have been dedicated to Facebook. As new tools come along that offer new things for us to do, or solve new problems, we will find time for them.
3. Our use of social tools is still maturing – Facebook is a collection of social tools, some people use all of them and others just a few. As we get used to sharing, interacting and engaging in different ways (and as the tools available catch up with how we behave anyway) we will change how we use the tools we have already signed-up for and the new ones. Maybe we’ll chat less on Facebook if we use Twitter for that, or maybe we’ll share photos more on Pinterest than we did on Facebook. Many of these decisions will be very personal and how we use these tools will be individual to each of us, the decisions we make and the people we connect with.

Pinterest, like many new social tools, is different to ones that have come before, and offers new ways of doing things. This is why it is successful and why it will continue to be so. It is not necessarily a threat to existing platforms and tools as it adds to the range of things that people can and will do online rather than competing with them. It will grow in a different way to Facebook and that is a good thing – it will have different growth strategies, the community will shape and change it to fit how they use the tool, and the monetisation model will drive different behaviours.

In fact if Pinterest were to become a Facebook it would probably be less successful as it would be trying to be something that it just isn’t at all like. Of course, there is probably one way that Pinterest probably would and should want to be like Facebook – a successful business that can command a huge value at IPO. That’s sadly not the comparison most of these pieces are making but is no doubt one that the people behind Pinterest would be happy with.

Following last week’s post exploring social media fears and opportunities for financial services brands, this blog post suggests three  ways that retail banks could make real, innovative use of social media to differentiate their products.

1. Social banking

Create a current or savings account with interest rates individually tailored based on a customers’ ability to recruit more members to the bank. New accounts could open with an average interest rate which increased by a small fraction each time a customer brought on a new member to join.

In the old days of member-get-member direct marketing, it was common for companies to offer discounts, gifts or value added services to customers who did the leg work in finding more customers. This model has now evolved into group buying from sites like Groupon, but there is evidence to suggest that “member get member” banking could work from Key Trade (under the control of Group Credit Agricole).

While Key Trade used a cash signup incentive, an interest based one would be a more meaningful commitment to a customer relationship and stronger motivator for recruiting new customers, particularly if interest rates could be competitive with current market offerings.

2. Social Micro Saving

Create a savings account which encourages you to micro-save via your social platforms. This could also be used to encourage micro-donation to charities. This could work quite effectively as a Facebook app which occasionally puts something into a subscriber’s news feed, reminding them to tuck £10 away in a savings account and make a small donation to charity.

Charitable donations website Just Giving noted the rise of social giving late last year and with the rise of applications like Snoball and SocialVibe, innovation is already beginning to harness the power of social donation behaviour to drive donations for charitable causes. If charitable donations can be contagious amongst social networks, it seems likely that social saving could be similarly rewarding and therefore contagious. Examples might include teams that are saving personal funds & raising charitable funds for expeditions, or groups saving towards a common goal such as holiday makers saving for a big trip.

3. Social Budget planning

Social gaming has proved itself remarkably addictive, but plenty of applications can the human desire to compete to good use. Mobile or social apps that let people compete over their personal budgeting targets could drive more careful budget planning & financial prudence.

As soon as NFC payment becomes a reality, mobile devices will be enabled to track spending both in terms of amounts and locations. If a couple, or group of friends decided to collectively budget towards a savings target, they could opt in to share how well they were performing against self-imposed goals. Personal financial data would remain private, but benchmarking against targets for lunch-time spending, for example, could earn gamers reward points & bonuses, just in the same way that FourSquare currently awards players with badges & Mayorships for check in achievements.

My purpose in exploring these ideas is to demonstrate the varied applications for integrating social media & social network behaviours with personal finance. With the growing popularity of The Co-Operative bank which offers customers a shared gains model and niche banks like Triodos offering consumer banking customers ethical and sustainable savings options, it’s not hard to imagine innovative, social financial products emerging as the financial services industry re-invents its public image.