Monday, April 30, 2012

The Demographic Social Tidal Wave About to Swamp Your Business

Many of the changes of the digital era came because older folks ("digital immigrants" like me) adopted new behaviors, but most of the inertia for business evolution occurred when a wave of "digital natives" came of age. What will happen when the current batch of young "social natives" reach their adult years? A lot, and this will require businesses do far more than just add to the IT stack and hire a couple community managers.

In the mid- to late-2000s, the Gen Y cohort--people who almost could not remember a time (and could not function) without PCs and the Internet--joined key advertising demographics, reached voting age and entered the workforce. Many companies anticipated this and had deployed digital strategies early, but some waited for the mid 00s before shifting significant ad dollars online, adopting email and online service channels and developing new digital products and business models. Companies bound to old business models struggled to adjust to new realities as their customer demographics rapidly changed.

One example of how the last major demographic shift swamped an industry is the photo business. Shutterfly and Ofoto, two early photo-sharing sites, launched in 1999 at a time when Kodak had a market cap of almost $22 billion. The startups foresaw the wave of change to come with young people adopting digital photography. Kodak waited two more years before getting into the photo-sharing game (by purchasing Ofoto, later renamed Kodak Gallery), but it never really understood how Gen Y was changing the photo business. Kodak Gallery didn't permit sharing in the same way as its upstart competitors, kept photos locked behind a registration screen, and in 2008--just as the use of mobile phone cameras was exploding--Kodak implemented an ill-fated program requiring customers to purchase items or lose their stored photos.

How did that work for Kodak? Since January 2005, when Kodak launched its rebranded online photo-gallery service, its stock is down over 99%. Currently, Shutterfly is acquiring Kodak Gallery for a mere $23.8 million and Kodak is restructuring. Shutterfly was the only bidder in a sad auction for Kodak Gallery, which gets fewer than a million visitors a month, down 29 percent in one year.

Source: MinorMonitor
So, what will happen within the next few years when "social natives" enter key buying demographics, join the workforce and begin voting? We'll find out soon. Facebook launched a high school version of the service in 2005 and opened to the general public (13 and over) a year later. Of course, many teens had already adopted social behaviors before Facebook via services like Myspace and Friendster, which hosted millions of accounts as early as 2003. This means that by 2015--just three years from now--the average 18 year old won't remember a time without online social networks. (And before anyone points out that 2015's new adults will only have been legally able to use Facebook for five years, it is worth noting that over 38 percent of children with Facebook accounts are below Facebook's 13-year-old limit.)

Many of today's leaders do not understand what it will mean to serve, sell to, market to or employ the new generation of social natives. The answer is not merely to have a corporate Facebook presence, advertise with Promoted Tweets and host a community on the company intranet. Social natives will bring vastly different attitudes and expectations into their adult years, and this will force changes in the way we steer our brands, conduct business, set policies, devise organization structures and manage employees.

Soon, we will need to employ and build relationships with people who are disconnected and awake less than an hour a day.  (Any longer and it "creates an unnerving sense of disconnectedness.")  We all know business hasn't been 9-to-5 for a long time, particularly for global brands, but serving a generation constantly connected and demanding of non-stop brand care and interaction is going to require an even greater focus on deploying a 24/7 enterprise.

Think of how quickly this single aspect of social demographic behaviors is changing our world. On a personal level, few of us employed in marketing, PR or social media ever truly disconnect any longer, and on a business level, most large organizations already deploy community management well beyond old-school "working hours." Still, few companies have significant numbers of service staff deployed round the clock.

Soon, it will take more than a skeleton second- and third-shift crew to meet the needs of never-disconnected "social natives." The customer who tweets a customer service question at 1 am will likely have no different an expectation about response time than the one who tweets at 1 pm.

The generation of social natives also evaluates its brand preferences differently than their parents. TV advertising? It's not dying, but neither is it going to be as effective as in the past. ComScore recently found that millennials are less likely to say they found a TV ad interesting, believable or likeable, and they are more likely to call it irritating.

Source: Bazaarvoice
If younger folks don't believe in TV ads, what do they rely upon? It sure isn't corporations--37% of millennials claim to distrust big business. Instead, social natives trust others; Millennials are 50% more likely than boomers to say that recommendations from strangers influence their opinions.

Another way millennials are different than preceding generations is that they aren't afraid to voice their opinions and act when unhappy. Whereas Gen Xers were more inclined to reject institutions that failed to serve their needs, millennials are far more likely to take action to force change. This isn't just the case for brands they use and buy but also for their employers. In an Ad Age article, economist Neil Howe, who coined the term "millennial" in the early '90s, notes:
"If you ask a bunch of Gen Xers [born in the '60s and '70s] what they would do if they didn't like where they worked, most would say 'leave.' But if you ask millennials that question, their attitude is, 'Someone will fix it.' They'll start IM-ing each other, a few will get Mom and Dad on their cellphones, someone will call the local media, another will alert the congressman."
Source: Edelman Trust Barometer 2012
And woe be to brands that think they can compete merely through operational excellence. Great products and services are table stakes to a generation that expects transparency. Edelman's most recent Trust Barometer study found that trust in CEOs and government officials experienced record declines in the last year while trust in other consumers and regular employees skyrocketed. Moreover, when it comes to building trust, the agency notes:
"The 16 attributes... responsible for shaping current business trust levels are largely tied to business competence, and those that will build future trust are more societally focused. Listening to customer needs, treating employees well, placing customers ahead of profits and having ethical business practices are all considered more important than delivering consistent financial returns."
The differences between social natives and previous generations go on and on. In Zipcar's fascinating study of millennials and driving (embedded below), researchers found that younger consumers:
Source: Zipcar
  • Find physical interaction less vital--nearly seven in ten say sometimes talk to friends online instead of driving to see them. 
  • Are willing to drive less if options are available--those under 34 are almost twice as likely than people over 55 to be willing to drive less, provided public transportation, car sharing or convenient carpooling is available.
  • Are ready to buy less and participate more in the sharing economy--compared to consumers over 55, those under 35 were approximately five times more likely to participate in car sharing and home- or vacation-sharing programs.

Is your enterprise prepared to sell to, rent to and employ a generation that is always on, empowered and prepared to take action, highly networked, more influenced by peers than ads, distrustful of big business, unforgiving of companies that aren't transparent, disinclined to conduct business with organizations that do not stand for something and more willing to share and rent than buy and own? What will happen when the current generation of ROI-maximizing, privacy-protecting, production-oriented, quarterly-obsessed CEOs runs headlong into a new generation that expects organizations to listen, make the world better, be transparent and commit to long-term societal missions?

Explore more EK Data at Wikinvest

Explore more SFLY Data at Wikinvest

Many companies think they know the trends and are comfortable planning for change in the future, but they are not really prepared. In 2008, when Kodak was comfortable with its decision to make sharing difficult and to force users to buy something or have their photographic memories deleted, it had a market capitalization of over $5 billion and Shutterfly was worth less than $200 million. Today, Shutterfly has a market cap of $1.1 billion and Kodak is in bankruptcy with a market cap of $77 million.  Of course, even innovators need to play by market rules, and later today Shutterfly announces its latest quarterly earnings; it may have bested the giant Kodak, but with social natives seeing no need to print photos given Facebook's (not to mention Twitter's, Instagram's, and Flickr's) free storage services, even Shutterfly could get crushed in the next demographic wave.

In very short order, social natives will be your customers and employees. Time is not a luxury today's businesses can enjoy when considering the evolution required in the next five years.

Tuesday, April 24, 2012

Social TV Saving Live Television

For decades, technology has chipped away at TV. VCRs, streaming Internet video, file sharing, DVRs, on-demand cable and mobile video provided TV alternatives, decreased TV's audience, increased time shifting or encouraged ad skipping. One of the intriguing things about social media is that it is the first technological advance that really benefits TV without specifically being about TV.

Of course, television was social before we had social media. TV shows drove "water cooler" chatter since Lucy Ricardo gave birth to "Little Ricky"--71.7% of all American TV sets were tuned to "I Love Lucy" the night Lucille Ball's character gave birth in 1953. Crowdsourcing is not new to television, either; letter writing campaigns to save TV shows date back to at least 1968 when fans got NBC to renew "Star Trek" for another season. The fact TV viewing is innately social makes it the perfect match for today's social media and mobile technology.

With the real-time sharing that happens via social media, it once again seems exciting and necessary to watch live TV. No one wants to see spoilers of their favorite shows--a recent TV Guide study found that 27 percent of us are watching more live TV to avoid plot and reality spoilers revealed on social networks. People may hate them, but don't expect TV networks to make it any easier for you to avoid those spoilers; hashtags are popping up in the corner of TV screens to encourage viewers to join the dialog on Twitter. According to Chloe Sladden, Twitter’s director of content and programming, those perpetual hashtags can at least double the amount of activity and could drive as much as 10 times the tweets.

The desire to join the conversation is a huge way social media is driving live TV viewership. What fun is it to tweet your love, shock or disappointment in an episode days after everyone else has seen it? Tweeting about last week's episode of Fringe makes as much sense as tweeting, "OMG, Mulder just told Scully that he loved her!" In our fast-moving world, it doesn't matter if it was last week or last decade--it's all ancient history as of this moment.

The power of real-time social media to drive TV viewership was demonstrated last year when Charlie Sheen made an 11th-hour appearance on CNN's "Piers Morgan Tonight." Though the show had almost no advance promotion, social networks lit up once the interview began, and 45 minutes into the show, viewership in the 25-to-54 demo was up 61%.

Networks are also encouraging real-time social media engagement with their shows by making stars and reality TV contestants available to fans. The competitors on The Voice are encouraged to tweet and connect with their fans, quite a change from when American Idol prevented contestants from having active Myspace pages or Twitter accounts. In addition, more and more networks are increasingly featuring stars in Twitter chats while their shows are broadcast.

The growth of mobile technology is powering multitasking and sharing while watching TV. According to Elizabeth Shaw's recent Forrester report, almost two-thirds of Gen X and three-quarters of Gen Y consumers go online while watching television. Further evidence comes from Nielsen, which found that 88 percent of tablet owners and 86 percent of smartphone owners used their devices while watching TV at least once during a 30-day period. It turns out this behavior is extremely common--roughly two-thirds of these folks use their device while watching television at least several times a week. 

Today's Social TV is being powered by more than just Twitter and Facebook; new sites and tools such as GetGlue are focused on increasing social engagement around live TV. GetGlue only has 2 million users, but it has already driven 100 million check-ins (although entertainment check-ins have a long way to go to catch Foursquare's 2 billion location check-ins.) Many other tools, including some created by the networks themselves, seek to drive more Social TV activity. Other sites and apps include MTVWatchWithNBC Live, IntoNow, Miso and show-specific apps such those for Bones, Celebrity Apprentice and New Girl

Between GetGlue, Twitter, Facebook, blogs and boards, lots of us are talking about TV, and this is not just common among teens; in fact, according to Nielsen, people who talk about TV shows online skew older. The 25- to 34-year-old demographic accounts for just 17 percent of the overall social media population but is responsible for 29 percent of those on sites talking about TV.

All the check-ins, tweets and posts are having an effect. TV Guide's study found that 17 percent of respondents say they have started to watch a show and 31 percent say they have continued to watch a show because of a social impression.

Another study by NM Incite, a Nielsen/McKinsey Company, found a complex relationship between social media buzz and TV ratings. Buzz most closely correlated with increased TV viewership in consumers aged 18 to 34; in this demographic, a 9% increase in buzz volume around the time a show premiered correlated to a 1% increase in ratings, but as the season wore on, the relationship between the two variables weakened. However, with older viewers, social buzz had a greater impact on ratings toward the end of the season than at the beginning or middle.

In addition to driving attention and viewership in shows, TV networks are also using social media data to tweak their shows to be more appealing to viewers. The producers of the 2010 MTV Video Music Awards focused more attention on Lady Gaga after her meat dress became a trending topic on Twitter. Simon Cowell, who once criticized celebrities on Twitter by asking, "Why would you want to talk to people like that?", now uses audience feedback from Twitter to influence the format of The X Factor and tweets regularly at @simoncowell. New services such as Trendrr.TV are giving networks reams of data to measure viewer affinity not just for shows but also for granular attributes such as plotlines and characters.

The opportunities in Social TV will only continue to grow as more case studies demonstrate success. The 2012 Video Music Awards (VMAs) is one such success story. MTV pushed the #VMA hashtag using a Promoted Trend and on-screen text during the broadcast. It also hosted an online “Twitter Tracker” site during the award ceremony and displayed the results during commercial breaks to attendees in the theater to encourage their participation online. MTV's microsite even featured a seating chart of the theater to see the spots from which celebrities were tweeting.

The social promotion effort worked. Twitter saw over 10 million VMA Tweets, and the Promoted Trend had a 16% engagement rate, driving 27 times the average mentions of MTV’s Twitter account and adding 128,000 new followers to MTV’s Twitter account on the day of the event. The social media activity contributed to the success of the 2012 VMAs broadcast--it was the largest audience ever for any telecast in MTV’s history.

How will social TV continue to evolve and change television? That is like a season-ending cliffhanger: You will just have to tune in next season to find out. 

Monday, April 23, 2012

Where Are the Social Business and Sharing Economy Jobs?

If you follow me on Twitter*, you may know that I am seeking a new job.**  Given where we are in the maturity of social business and social media, I expected I might find opportunities focused on the social business transformation that is underway, but instead those jobs are few and far between.

The world is changing, and social media is already altering consumers' relationships with the products and services they purchase and use. What is evolving is not just the way social changes marketing and communications but how social revolutionizes the products and services themselves. I have written about the profound social business transformation that is underway (such as in "The Past of eBusiness and the Future of Social Business" and "Eight Ways Social Business and Mobile Tech Are Changing Your Business"), but you do not need to take my word for it. You can check out great articles about the evolving world of social business and collective consumption in The Week, FastCompany, Mashable and Forbes.

Many companies need to retool the way they do business, because yesterday's business models will not work for tomorrow's consumers who are adopting and growing up with new sharing behaviors. In the same way the new "digital natives" of the past decade changed how we buy, consume and use news, music, photos and books, tomorrow's "social natives" will bring substantive changes to the way we use and buy (or don't) cars, financial services, durable goods, hospitality services and more. Given this, you would think that it might not be too difficult to find a job focused on social business and not merely on social media marketing and communications. I am finding quite the opposite.

If the sharing economy is about to throw a wrench into many industries, where are the jobs that will help to facilitate this transformation? Today's enterprises are full of positions that manage the processes, channels and systems brought by the last major wave of digital change, but there are few opportunities for those who will manage the next wave of social media change.

Search for "e-business" and you will find almost 800 jobs posted in the last 30 days. Search for "Social Business" and you will find only 150 jobs, and these jobs are considerably more junior than the e-business openings--most of the e-business jobs are in Fortune 500 firms and require more than 10 years' experience, while few of the social business jobs are in Fortune 500 firms and the vast majority require less than five years' experience. Leadership jobs that require social media skills do not measure up to Web counterparts, either. A search for Vice President jobs with digital, interactive or internet requirements yields over 800 openings; there are less than half as many Vice President openings that require social media or social business skills.

With rapidly changing demographics, social behaviors, social technologies and sharing habits, the growth of the sharing economy is nothing to take lightly. One need not look far to recognize the dangers of failing to keep our business processes and products in line with changing customer tastes, expectations and habits. Research in Motion stock is down 73% in five years; Kodak is down 96%; Borders Group is down 97%; Sears down 72%; Nokia down 85%; and in the five years before its acquisition by HP, Palm stock lost 61% of its value. Blockbuster, Tower Records, AOL, Polaroid, Virgin Megastores, Myspace, Gateway, Yahoo, Sega, Circuit City, Hummer, Oldsmobile--it simply is not hard to see how quickly profitable and well-established companies can fail if they hesitate to keep up with changing consumer habits, tastes and expectations.

So, where are the jobs to lead this next wave of change? Are existing leaders bringing this change to their organizations, eliminating the need for professionals with deep expertise in social business? Are today's social media managers evolving from a focus on social communications to a focus on social business models? Are companies simply not investing in the sharing economy as of yet? Or will this change only be led by vendors who offer social media tools and services (such as social media management and commerce suppliers) and startups who strive to compete against the established players (a la Amazon vs. Borders circa 1995?)

What are your thoughts? I would appreciate your input and dialog.
* If you are not  following me on Twitter, why not?

** I love USAA, its mission and my team, but my wife and I are struggling to adjust to San Antonio and are seeking to return to large city with livable urban options and big-city amenities and activity.

Monday, April 9, 2012

The Past of eBusiness and the Future of Social Business

While social media may today feel mature and fully integrated into our world, we have only seen the start of the changes social technologies and behaviors will bring to our personal and business lives. Profound evolution is coming that will alter how we operate our businesses, buy products, manage money, attain status and establish and protect our identity.

It is instructional to look at how the Web developed, because it provides a means to understand how nascent social media still is and how much change is ahead. In 2011, the number of US adults that use social media sites surpassed 50% for the first time. To put that into a historic perspective, the Web surpassed the 50% adoption mark in 2000. Now consider the amount of change the Internet has brought to business and our lives since 2000, and you get a sense for the substantial transformation that social media and social business will create in the next decade.

Some of the changes social media and social business will deliver will be welcome, but some of it not. After all, the Web brought many changes we all cherish (Free email! Real-time news! Videos of cats playing piano!) but many we do not (Connected to work 24/7; loss of privacy; online bullying). Exciting and difficult times are coming.

As my friend, Neff Hudson, likes to say, “There’s a lot of future in the past.” We cannot predict the future of social media and social business with certainty, but the trends and outcomes become much clearer as we compare and contrast the Web experience of the past 15 years to the social experience we can expect in the coming 15 years.

PHASE ONE: Businesses and Most People Pay No Attention

The Web: The advent of the Web was not the first time people used computers to communicate and access information on networks; Bulletin Board Systems had existed since the 70s and were hardly setting the world on fire. When Prodigy and AOL opened up the Internet to the public in 1995, the world greeted this momentous event with a yawn. Most people said they had no interest and found it dangerous; business dismissed the Web as a place for geeks and kids; and naysayers predicted people would never purchase $2,000 PCs and rewire their homes just to use the Internet. Still, some people recognized the trends and invested in the future; in 1995, while bookseller Borders sat confidently on hundreds of millions of dollars of investment in their retail stores, a guy named Jeff Bezos launched and sold his first book, “Fluid Concepts and Creative Analogies.”

Social Media:  The advent of Friendster, Myspace and Facebook was hardly the first time people used the internet to connect and share; sites like Geocities and permitted people to update personal web pages and share connections, and these sites were hardly setting the world on fire. When Facebook opened its gates and became a public social network in 2006, the world greeted this momentous event with a yawn. Most people said they had no interest and found it dangerous; business dismissed Facebook as a place for geeks and kids; and naysayers predicted people would never embrace online social sharing widely. Still, some people recognized the trends and invested in the future. It is too early to tell who may be the Jeff Bezos of social business, but at a time when few people saw social media as a business platform, Shelby Clark started RelayRides, Chris Larsen launched P2P lender Prosper,  Renaud Laplanche initiated LendingClub, and Perry Chen, Yancey Strickler, and Charles Adler created crowdfunding site, Kickstarter. (Only time will tell if these names are mentioned alongside Bezos' ten or fifteen years from now.)

PHASE TWO: Consumer Media Consumption Habits Change and Marketers (Slowly) Take Notice

The Web: In the late 90s, the Web was growing. Adoption was strong, particularly among younger consumers. Most in the business world still shrugged, but the Marketing Department took notice. The shift of marketing dollars into the online channel substantially lagged behind the shift of consumer online media consumption, but marketers cautiously began to invest in banner ads and search ads. Marketers also launched their companies’ first web sites, but they did not embrace the fundamental principles of this new medium. Early sites took the text and images used in existing print collateral and pasted them into static, non-functional Web pages, resulting in the term “brochureware” to describe the first generation of Web sites.

Social Media:  In the late 00s, social media was growing, led by blogs, Facebook and Twitter. Adoption was strong, particularly among younger consumers. Most in the business world still shrugged, but the Marketing and PR Departments took notice. The shift of  marketing dollars into the social channel substantially lagged behind the shift of consumer social media consumption, but marketers cautiously began to invest in blog advertising, sponsored conversations with bloggers, and Facebook advertising, with 70 billion display ads appearing on Facebook in the first quarter of 2009. Marketers and PR professionals also launched their companies’ first blogs, fan pages and Twitter profiles, but they did not typically embrace the fundamental principles of this new medium. Early blogs and social media profiles took existing press releases and pasted those social media sites, and some marketers treated blogs as they would paid media and were embarrassed when their efforts to buy their way to blog success were revealed, resulting in the term “splog” to describe spam blogs.

PHASE THREE: New Business Ideas Attract Investment Faster than Customers

NASDAQ's two-year 188% dot-com climb
The Web and e-Commerce: By the late 90s, a dot-com boom was underway. As early Web retailers like Amazon grew rapidly, the business world took notice and got scared.  Old-line business worried that it was out of step with a “new economy” defined by clicks and users and not earnings per share, and investors feared they were missing something big and threw money at any entrepreneur with an online business idea. For example, dozens of online pet stores launched and competed to gain users quickly and at any cost; raised $300 million of investment capital and bought expensive Super Bowl advertising in the land grab for new online customers. The focus of all this attention was not really on robust e-business but specifically on e-retail; Amazon and sold physical goods, just like the book and pet stores on the corner, and most business leaders obsessed over how the internet would affect price, selection and delivery of existing products rather than on how it might create new products and services. Then in 1999, Sean Parker launched Napster and sent shockwaves through the music industry, demonstrating that the Internet was not just a medium to market and sell physical CDs.

Social Media and Social Commerce: A social media stock boom has and may continue to occur. As Facebook’s share of the display-ad market grew from 2% in April 2009 to 20% in April 2010, the business world took notice and got scared.  Old-line business is worried it is out of step with a “new economy” defined by retweets and likes and not earnings per share, and investors fear they are missing something big and are throwing money at any entrepreneur with a social idea. For example, many group-buying and -discounting sites have launched and are competing to gain users quickly and at any cost; by the end of 2010, Groupon had turned down a $6 billion offer from Google, raised almost a billion dollars in venture capital and was buying expensive Super Bowl advertising in the land grab for new social customers. The focus of all this attention is not really on robust social business but specifically on social retail; Groupon and Facebook advertising are largely driving people into existing businesses like the book and pet stores on the corner (and to online retail sites) that sell existing products, and traditional retailers such as Gap and JCPenney launched early F-commerce stores on Facebook. While not as headline grabbing as Groupon’s, LinkedIn’s and Facebook’s IPOs, small peer-to-peer business companies are showing strong growth and demonstrating social media can be a medium for collaborative consumption and not just a medium to market and sell existing products.

PHASE FOUR: Stock Values Crash While Business Value Widens

NASDAQ's one-year 63% dot-com crash
The Web and e-Business: As it turned out, profits and earnings per share mattered. The dot-com bubble burst in painful fashion, destroying $5 trillion in market value between 2000 and 2002. The correction even caught the winners of the Web 1.0 era—after five years, Amazon had yet to make its first dollar of profit and could not build earnings quickly enough to justify its exorbitant stock price, and shares plunged from $107 to $7. Startups like with weaker business models never made money and evaporated completely. However, what crashed were stock values and not the value of the Internet, and out of the ashes of the dot-com disaster grew something bigger and stronger. Consumers continued to adopt the web, broadening both the demographics and the use of the medium.

Online consumers had different expectations and demanded more—they wanted more product information, access to account information  and service in their channel of choice, and they wanted it now. Online advertising and e-retail continued to grow, but something more substantial was happening—brochureware sites were replaced by rich, functional web sites, and the Web evolved from a focus on marketing and retail to a focus on business value throughout the enterprise.

Social Media and Social Business: I believe we are in the midst of a slow-motion social media market correction. Profits and earnings per share matter, and soon investors will care that Zynga and Groupon are struggling to attain and sustain profitability. Groupon is already trading near its all-time low price, almost half of its peak price five months ago, and a recent analysis demonstrated that just three of 2011’s twelve social IPOs were beating NASDAQ. I expect the social media bubble burst to be less painful because exuberance is not as great today as it was in 1999, but it still would not surprise me if the correction caught the winners of Web 2.0 era, causing Facebook’s post-IPO price to plunge as it struggles to build earnings quickly enough to justify its stock price. However, even as the market reconsiders the valuation of social media companies, something bigger and stronger is growing. Consumers continue to adopt social media, broadening both the demographics and the use of the medium.

Social consumers have different expectations and are demanding more—they want access to the objective opinions of other consumers, demand companies respond to their complaints posted to social networks and expect organizations to be more transparent about corporate practices, and they want it now.  The first F-commerce sites failed because they didn't bring true social benefits to the shopping experience, but social commerce can be expected to grow. In addition, advertising on social networks will explode as marketers continue to shift more dollars to the channel where consumers spend so much time. But, something more substantial than just social ads and retail is happening today—PR-oriented corporate social media profiles are being replaced by robust communities and dialog where companies engage consumers (and consumers engage each other) around business policies, service needs, new product ideas, employment, and more. Social media is evolving from a focus on marketing and PR to a focus on business value throughout the enterprise.

PHASE FIVE: Now It Gets Interesting: New Products and Business Models Challenge Old Ones

Estimated Quarterly US  E-commerce Sales
as a Percent of Total Quarterly Retail Sales
The Web and e-Business: For all the headlines and investor enthusiasm about e-retail in 1999 and 2000, the percentage of total US retail that occurs online did not surpass two percentage points until two years after the dot-com crash. Since then, the growth has been steady, but despite the fact online retail has shaken retail to its core and forced former powerhouses like Borders into bankruptcy, e-retail still represents just one of every twenty retail dollars spent in the US. Of course, online retail is wildly uneven, affecting some categories far more than others; digital sales of music surpassed physical sales just last year.

While the impact of e-retail has been significant, that is not the big story of this phase; rather, in recent years the Web has fundamentally changed consumers’ relationships with products and services. We used to buy CDs and listen to music in cars and at home—now thanks to iTunes, iPods and cell phones, folks download music and listen throughout the day. Many said they would never give up the joy of a paper book, but just a few short years after the creation of tablets and e-readers, one in five adults read an electronic book in the last year and Amazon already sells more e-books than print books. Mobile wallets, digital photography, real-time communications, online news, delivery tracking—the Web is no longer a way to market and sell traditional products but the foundation for completely new ways to conduct business.

Social Media and Social Business: Social media will bring great change to our products, services and business models over the next ten years, just as the web did in the last ten years. This won’t happen quickly—Amazon was selling books online for 16 years before e-books surpassed print books, and Napster demonstrated that consumers would download music 12 years before digital music sales exceeded physical ones. The companies that led these changes tended not to be the big, traditional, existing ones but the startups. Barnes and Noble has been remarkably nimble for an old-school organization, launching its first web site two years after and deploying the Nook two years after the first-generation Kindle, but today Amazon has diversified its business and enjoys a market capitalization more than 100 times greater than Barnes and Noble.

This trend repeated across categories—Kodak was too committed to print photography to lead in digital photography, and Apple handed the record industry its butt because it was unencumbered by physical music models. Today, for example, banks may be too invested in physical branches to lead in the social business space for financial services; no banks have launched or invested in peer-to-peer unsecured lending (Prosper and LendingClub), direct peer-to-peer lending between friends and family (National Family Mortgage) or alumni-to-student college loans. The nascent Sharing Economy and Collaborative Consumption models promise to change consumers’ relationship with products ranging from cars (RelayRides and Wheelz) to lodging (AirBNB) to lawnmowers and drills (Rentalic and NeighborGoods). Perhaps big companies will get smarter this time around—U-Haul has already launched a peer-to-peer model to finance the purchase of new trucks and GM has partnered with RelayRides.

PHASE SIX: New Technology Rewires People and Society

The Web: You might have thought Phase Five was the end, but the web has done more than just change products and services—it has altered consumers’ attitudes about themselves and the world. Our world is smaller, faster and more connected today than 15 years ago. We never want for communications or entertainment. We are never disconnected from our friends or our jobs, no matter the time of day or day of the week. The web flattened corporate structures and altered organizational dynamics--business leaders are no longer protected by Administrative Assistants, work relationships are more casual and the speed and pressure of business have increased.

The Web made the world flat, instantly furnishing insight into happenings around the globe but also creating downward pressure on US salaries as outsourcing became exponentially easier. The Web put spectacular power into the hands of people, giving them the capacity to launch businesses, communicate widely and build reputation but also providing a platform for bullying, coordinating terrorist attacks and stealing identity. The Web has brought us together to raise record amounts of money for victims of earthquakes and tsunamis, but it has also furnished a way to drive us further apart as we reject news and information offered by a handful of media conglomerates and consume hyper-local, hyper-niche and hyper-partisan content.

The web has made parenting more difficult. Children grow up faster, can get themselves in more trouble, are exposed to more worrisome content and are impossible to monitor and protect as in the past. Parents cannot punish children by sending them to their room, because those rooms contain access to more information and entertainment than a TV network control room had three decades ago. Kids never have to negotiate for access to limited resources--homes that 15 years ago had one way to communicate externally and one screen for entertainment today have options too numerous to count. (Go ahead and try.)

The Web has affected how we go to school, date, work, age, retire and play. Absolutely nothing happens today that isn't caused by, planned, hosted, captured or shared on the Web. Without the Web, there would be no Tea Party or Occupy Wall Street, no multi-tasking, no telecommuting, no smartphones, no iPad, no World of Warcraft, no Angry Birds, and arguably no President Obama, Kim Kardashian, Lady Gaga, Justin Bieber or green movement.

Social Media: Social media has already affected communications in substantial ways, but the advent of peer-to-peer and sharing economy business models will do more than affect the communication networks we maintain. It will change:

  • Our sense of identity: We are constantly connected to others, communicate in real time, and have more and stronger “soft relationships” (but some argue weaker “hard relationships”). Our identity is increasingly created not in quiet moments by ourselves but in constant and pervasive social interactions. A strong majority of Millenials say they are so connected they are never really alone.
  • Ownership: Already, many people rent music via a subscription model rather than buying and owning audio tracks, and over half a million people have used Zipcar’s 8,900 vehicles. This is not just changing the way we get products and services—it alters long-held attitudes. Teens are less inclined to get drivers licenses than in past in part because they are more open to public transportation and often choose to spend time with friends online rather than driving to see them. Cash-strapped consumers are finding they don't need to own certain categories of things, they only need to access, borrow and rent them in real-time.
  • Status: As Collaborative Consumption rises, we will be defined less by what we drive, wear and own and more by our experiences and sharing—already more than half of Millenials agree with the statement “What I post online defines me.”
  • Privacy: In the past we cherished our privacy, but in the future many will happily sacrifice privacy in order to gain access to sharing economy goods and services. We may soon elect to add our credit history and driving record to our online personas so that others will be more willing to rent us their cars, lend us money, allow us to stay in their spare room or rent us their hedge trimmers.  Consumers will come under pressure to sacrifice privacy for transparency, but not because Facebook or some shadowy marketing research firm wants your data but because we will come to expect it of each other.
  • Pricing: The more transparent we become, the more fluid prices will be—if you rent your car, would you charge the same to someone you can identify with a strong reputation, transparent credit score and open and clean driving record as you would to @HotGuy1992? Who we are, the trust we engender, the influence we create and our actions online won't just affect our access to sharing economy goods and services but also will influence the prices we are charged. The drive to earn our way to lower pricing with better behavior and more transparency will be a powerful force that encourages smarter financial decisions in the future.

We are just scratching the surface of the changes social technologies and behaviors will bring to our lives. For individuals, the future belongs to those willing to embrace both the welcome and difficult aspects of a more social, transparent world.

The same is true for business; the future belongs to those who see and invest in the future and not merely protect today's business models or chase this quarter's ROI. moved while others ignored the trends; it saw a business platform where others only saw retail and marketing; it invested for six years to achieve its first dollar of profit; and then it put its predominant revenue stream at risk with a bold new vision for how consumers would consume content in a digital and wireless world. Today, founder Jeff Bezos' personal wealth stands at $18 billion while the combined market caps of Barnes and Noble and Borders is just $730 million.

“There’s a lot of future in the past.”