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Business Model Innovation: Social-Enabled Economy

Mani Gopalakrishnan 0

No discussion of social technology is complete without Facebook. Facebook’s mission is to give people the power to share and make the world more open and connected. It precisely does that. It allows friends and families to stay connected, brands to connect with consumers and provides them with tools to share images, ideas, locations, habits, activities, news, deals, so on and so forth. At the heart of it is sharing everything. The platform itself is free (well there is a cost to it).

As of 2nd Q 2015, Facebook has 968 million daily active users and 844 million of that access Facebook on a mobile phone[1]. Each one of them probably shares, likes, comments, and engages with different entities on Facebook. As of April 10, 2014, they stored over 600 Tera Bytes of data every day with a 3x growth[2] and then had to figure out a strategy to effectively scale their data center and operations.

When it went to IPO, Facebook still had to figure out its core business model and with the vast amount of data, everyone knew it was only a matter of time. So what is Facebook’s business model?

  • Insights: Facebook’s power is all it knows about people. About 1.49 billion have made themselves available by publicly and voluntarily sharing a lot of information ranging from their profiles, school, job, relationship status, life milestones, eating habits, photos, and a lot more. Using its Facebook exchange, you can literally target the exact portion of its 1.49 billion people. For example, since Facebook knows your gender and relationship status, as a wedding gown maker, you can literally advertise into the streams of millions of newly engaged women waiting to get married.
  • Intent: Increasingly Facebook’s mobile usage is outpacing its web-usage. So what did Facebook do? It started learning a lot about users’ location and then makes that available via its Facebook exchange. Now you can use both the “resident location” as well as “your location at any given point in time” to deliver targeted ads. For example, its lunch time and Facebook knows you eat a lot of Mexican Food at a specific chain (of course you told Facebook about it by checking in frequently). You are in an area of that particular chain, it can stream a coupon to you (or) gently nudge you to go eat again at your Mexican restaurant.
  • Interests: One of the biggest and boldest plays from Facebook was its ambition to build the Social Graph. It started by making itself available as a “button” on any willing site. Anyone or company or application could simply tap into the power of Facebook Platform by allowing prospect users to login using their Facebook credentials, use the like buttons on their web-sites to post something to their stream, share it with specific users, and lot more. All of a sudden, Facebook’s ambition went from connecting people to understanding and learning about them to make it that much bit more sophisticated.

Facebook did have its faux pax moments but it emerged stronger through those because it played into the human psychology of wanting to share, wanting to be liked, wanting to be appreciated, and provide tools to stay connected in this digital age. Facebook’s ambition is growing. It is now making a solar-powered plane called Aquila to power Internet because it knows the only way it can add more people to its network is by making the Internet more accessible.[3]

Companies like LinkedIn, Amazon, Twitter all do the same thing – they are into knowing all about you – insights, intent, and interests in different contexts and personalize their offerings heavily in your favor.

Even Facebook isn’t spared. Increasingly as the world goes digital, there are numerous innovations that have occurred in the name of social-enabled businesses. The most notable of them are:

  • Marketplace Networks: They provide transactions among multiple buyers & sellers. They combine the social elements of Facebook or a LinkedIn, with a marketplace and a workflow to onboard, market, sell, and build brand reputation. [4]A good shining example of this is Honeybook. Honeybook basically connects caterers, event planners, florists, and venues to an individual who is at the heart of an Event (say wedding). Similarly, Lending Place connects borrowers to investors. [5] . For example, Airbnb makes accommodations (not hotels) owned by just about anyone visible to anyone who is looking for one one. It doesn’t own any facility but leads with a platform.
  • Gig Networks: These are marketplace networks with a purpose to connect human capital within the context of a “challenge”. For example, you can recruit a freelancer to do your graphics work on UpWork or Fiverr, put out activities on TaskRabbit and pay someone for it, request help to haul boxes through lug, or get high-end consulting help at HourlyNerds. The idea is to democratize human working relationship and then let the brand/reputation of the individual take its course.
  • Entrepreneurial & Invention Networks: Kickstarter is a great example that connects anyone with an idea to a funding mechanism. Since its launch in 2009 and as of September 2015, 9.4 million people have funded about $1.9 billion to create 91,000 creative projects. [6] It then gives rise to the likes of Indiegogo, SmallKnot, GigFunder, and a lot more. Then there is Quirky. It calls itself a community company and its mission is to make innovation accessible. Through its platform, it brings together the idea, the experts, as well as its own resources to co-create new products and then bring them to market.
  • No-Stack Companies: Uber is a shining example. It basically uses Google Maps to route drivers to your locations. When you think about the SMS you receive as soon as the car arrives, it comes via Twilio’s API, and the receipt comes with the SendGrid’s transactional email system. The best of all, it doesn’t own a taxi/car or the employees. After being “uber” successful, Uber is now venturing into business a model that leads to delivering food, packages, and even helping optimize routes within New York City.

This is just the beginning. It is even beginning to challenge norms like definition of employment, contracting, and labor laws. So what do we learn from all this? It teaches us business model innovation by:

So what do we learn from all this? It teaches us business model innovation by:

  • Connecting people to various “aspects” – brands, content, products, people, and so on, which is leading to a new form of business, called Marketplace Networks.
  • Monetize data through extensive targeting – in this instance it is advertising
  • Build a business model around free – core platform is free but services around it cost
  • Power of platform – open it up so others can innovate on it
  • Simply learn – learn about your customers in every possible way
  • Go beyond the core – A plane to connect people to the Internet so they can use Facebook – sounds like an accidental business waiting to happen.

So which of the above can you simply do? Think about it and let me your thoughts via comments.

 

Credits:

[1] http://investor.fb.com/results.cfm

[2] https://code.facebook.com/posts/229861827208629/scaling-the-facebook-data-warehouse-to-300-pb/

[3] http://fortune.com/2015/07/30/facebook-solar-power-plane-aquila/

[4] http://techcrunch.com/2015/06/27/from-social-to-market-networks/#.mxuatv:DQl8

[5] http://techcrunch.com/2015/06/27/from-social-to-market-networks/#.mxuatv:DQl8

[6] https://www.kickstarter.com/hello?ref=footer

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