CHAPTER 3

The Social Interface—Media and Marketplace

The Avon Ladies were a brand unto themselves, and they sharpened a model that Tupperware had pioneered in the 1940s and 1950s. But both depended on a couple of common principles—direct sales and social networks. Not the online kind, but good old social connections. People whom you would trust, and do dinner parties with. Business has always relied on social connections, so we shouldn’t be surprised that the online social networks of today are so valuable to businesses.

Facebook has outlasted a host of other social networks such as MySpace, Tribe, Bebo, Orkut, and so on to reach 2.89 billion worldwide active users as of mid-2021, which means nearly 40 percent of the world’s population now uses Facebook regularly. (WhatsApp, owned by Facebook has another 2.5 billion.) So it is understandable that when we say social, we imply Facebook. Twitter has under 200 million users, and LinkedIn has about 600 million, for comparison. In recent times, TikTok has grown spectacularly, reaching a billion users and is a preferred social network for many, especially younger people who tend to eschew Facebook, so this is one to watch.

The Value of Social Networks

You probably know that listening to consumers is one of the biggest benefits from social media—whether replying to direct messages or analyzing sentiments. But here are a few other ways social media adds value.

Mass-Customized, Micro-Targeted

Facebook and other major social networks are effectively today’s mass media. There are ever fewer opportunities to address very large audiences, with the fragmentation of traditional media. But also, because no other platform as much intimate access to people’s lives as Facebook does, it’s also mass customizable. Where else can you direct a marketing message that will be received by divorced, democrat-supporting Americans with an interest in heavy metal and tattoos, living in Ohio?

Sentiment analysis is now a common term in business. In 2010, a couple of MIT scientists showed that tracking Twitter mentions provided a more accurate forecast for the success or failure of a film than the best alternatives of the time, such as the Hollywood Stock Exchange, which was by itself a kind of social sentiment aggregation platform. The writer and Entrepreneur Christian Rudder says that we are seeing the death of traditional market research—because we no longer have to ask people questions when between Google, Facebook, and other platforms we can see the actual choices, views, and opinions of people at a larger scale, and without the sampling bias.¹ Data from the major platforms is deeper and wider than any market research can match. Moreover, it is naturally a longitudinal study because it retains data about people—so over the next 20 years and beyond, social networks will be able to track the evolution of thinking for an entire generation and more.

Influence as a Service

This means a switch from traditional advertising—which is all about having the loudest voice and saying the funniest things, to a model where you have the most number of others rooting for you. The big opportunity here is to convert your customers into brand ambassadors. And you know which sounds more authentic. The recent rise of influencers is an additional factor in this mix. Ryan Kaji, who lives in Texas and is about 10 years old, earned close to $30m for his YouTube videos in 2019, largely involving unboxing toys and educational material. This feels a little bit like we’ve come full circle back to celebrity endorsements on television in the 1980s, doesn’t it?

Trust as a Service

The link between commercial and social networks is as old as civilization, and this is finding new expression today. Facebook has dabbled in commerce, shopping, and payments via FB messenger and WhatsApp. The most recent being the efforts to create a cryptocurrency called Diem (earlier known as Libra). Payments are also now available via Facebook messenger, in the United States. In China, WeChat has long since integrated payments into its messaging solution. Professional networks such as LinkedIn have evolved into a leading hiring platform. TripAdvisor also allows you to book hotels and restaurants through its portal. New banks such as Revolut and Monzo also allow you to easily pay contacts. Open banking regulations have also made it much easier to set up payment and transaction services. The backbone of commerce is trust, and that’s what social networks provide. Services such as Trustpilot have actually created commercial models by providing trust as a service for these community sites. And large number of services allow you to sign up with your Google or Facebook credentials. This is another way in which social networks are providing identity and authentication, to enable trust. eBay was an early mover in this space, as they rolled out a rating system that has become a sine qua non of almost every ecommerce or transactional site.

Exploiting Social Networks

The Challenge of Transparency

The era of pervasive social networking also brings challenges for businesses. Most notably, it marks an end to the time where companies could mask average products with great advertising and marketing. Bad news travels fast on the network, and the implication of this is that companies need to go back to the drawing board and ensure that products are up to the mark, or they will be found out very quickly. Inefficient airline operations, poor technical support for electronics, or bad assembly for a flat packed item of furniture—all of these get noticed and shared quickly. The first stop for surviving in the connected world is to ensure product and service quality. You can then follow through by providing information, building trust and transparency, and finally move on to socialization. This is why, TripAdvisor is often a first stop for holiday planners, or reading the reviews is essential part of shopping on Amazon.

Measuring Social Value

You could say that social media is also a cesspool of entrenched opinion, conspiracy theories, and trolls. And you’d probably be right as well. There’s a lot that social media businesses need to do, to address these concerns. But even within this environment, it offers brands a chance to identify what they stand for. Nike’s deal with Colin Kaepernick is a good example of this. In 2019, Nike agreed to a Kaepernick request to recall a shoe with an objectionable symbol on it. Nike’s stock went up by 2 percent on the back of this, amounting to a gain of more than $2.5 billion. Social media connects people to issues, and allows us to quantify the value of those connections, irrespective of which side of various political debates you’re on.

The Value of Connect

This used to be the mobile firm Nokia’s tagline. In the context of this book, we need to see the value of social media as the primary way that people connect with each other in the 21st century. If human history has been driven by how we connect, then the early marketplaces on the banks of rivers, and the pubs and coffee houses of the industrial era, have given way to the online melting pot of social media. Many banks now use social media as an analysis tool for evaluating risk profiles of individuals.