Additional Thoughts on Twitter

A comment from John Dexter had me thinking even more about the Twitter problem.  I think it is clear to me, more than ever, that owning the platform is more important than owning the interaction when it comes to Twitter.  

In 2012 Twitter decided it was going to be an app company instead of a platform company.  They blew off their third-party developers in hopes to bring all of the eyeballs from the Twitter stream/firehose into their own app and webpage to monetize with advertising.  This essentially laid the groundwork for Twitter not owning just the platform, but owning the entire experience.  In the case of Apple and Facebook, this is good because it is their core competency to own all the widgets.  When looking at Twitter, a big reason they are where they are today is because of innovations by third-parties.  They would not be in mobile if it wasn't for other developers getting there first.  All of the app innovations have been made by third-party developers, so much so that Twitter had to purchase one of them to catch up.

Twitter should take a step back and develop the platform to generate revenue.  If agreements were laid out to developers allowing them to get a piece of the ad revenue generated through their apps, they would be great partners in pushing the ads in new and intuitive ways.  Twitter can then focus on knowing the Twitter customer, the logged in user, better than Facebook knows their customers.  I believe Twitter has an advantage because they know peoples interests better. The people I follow on Twitter align more to my interests than the people am "friends" with on Facebook.  Facebook tends to focus more on real-world relationships and the close knit social graph.  

Once Twitter can repair the relationships with third party developers and focus on developing the platform to maximize ad placement, they don't have to worry about innovating apps that sit on top of that platform, which they are not particularly good at doing anyway.  This model would bring the most app innovation, while at the same time, allow Twitter to focus on revenue generation for the platform.  The third-party developers would have to share all the data back  and then Twitter can be the master of the customer, which is where the ad revenue will come from.  Focus on being able to deliver the best ad to people consuming the stream.  

Great Brand Apps Create Loyal Happy Customers

Mobile apps are the way we will interact with all of our loyalty programs in the digital age.  Smartphone apps can do so much more than a piece of plastic or punchcard could have ever imagined, yet so many companies have built half-baked, poorly thought out attempts at creating a customer experience.  But the good news is there are some leaders that are nailing it.

The 4 qualities a mobile app should possess are:

A mechanism to capture transactions 

At the heart of the mobile experience should be the mechanism to capture data about the customer.  This data should feed into the loyalty program of the brand.  This should come in the form of transactional, interests, surveys and geo location data.  Data is the building block for a loyalty program to succeed.  

Frictionless transactions

A mobile app has the ability to eliminate the frictions of the transaction.  For example, at an Apple Store the customer can enter the store, open the app, scan the item they would like to purchase and then leave the store, all without having to interact with a human or wait in line.  That is eliminating friction.

A mechanism to communicate with your customers

Mobile is a channel.  It is perhaps the most important channel in the new digital marketing era.  The phone is always on your customers body and that will soon include wearables.  The ability to push messages to your customers through this channel is extremely important.  The ability for your customer to open the app and see their loyalty program details makes communicating with your customer more personal than ever before.  This includes beacon support to guide the customer through the offline experience as well.  This should be the channel that receives the most focus in the coming years.

An engaging experience without a transaction

Mobile apps hold a space on the customers phone.  If you make your app engaging, even when the customer is not making a transaction with you, you may keep a good position on the phone.  Think of it as search rankings, the more prominent position, the more engagement with your brand.  Get stuck in a folder on the third page, you will only be utilized as a mechanism for transactions which is not the worst thing in the world, but doesn't drive behavior. 

Starbucks has been on the forefront in the mobile app space since it introduced its mobile app in 2011.  Starbucks took the approach of creating an app that engages customers when not in a Starbucks, along with making the transaction process frictionless.  Starbucks has long partnered with Apple by giving away free music and apps, but they also moved this functionality to the app.  By doing this, Starbucks has been able to engage their customers with their application outside of the brick and mortar stores.  I consistently look at my badges from Starbucks to see what free apps or music they are giving away this week.  Most of the time I don't get the freebies because they are not to my liking, but every once in awhile I do.  But it also has trained me to constantly go to the app.  I check my points and how far away I am for a free award and I am not even a big free award kind of a guy.

Starbucks has also made a frictionless payment process that also tracks my behavior.  I always received gift cards from Starbucks and had them strewn all over the place.  Some made it to the wallet, some were in drawers, but they were never consolidated.  Starbucks also had a loyalty program that was tied into a gift card, but it was confusing on how to interact with the program when I wasn't using that particular gift card.  Plus having to manually add money to the specific gift card was far from frictionless.  So I never really used the loyalty program and I was going to Starbucks less.  The app has removed all of this friction.  It is easy to transfer gift card money to the main loyalty account, which was a main pain point for me.  It also allowed for easy addition of funds into the card through the app.  These two items made using the program much easier.  

The other app that I have been very impressed with is the Chipotle app.  This app is a little different from the Starbucks app because it is just solving one problem, waiting in line.  The app allows you to place a Chipotle order and skip the line to pick it up at a designated time.  Now I don't know if any of you have been in a Chipotle and have to wait in the line to order, but it could be a fifteen minute exercise in browsing Twitter.  The app saves your favorites and recents so it takes approximately 20 seconds to place an order.  Pay online, just walk to the cashier and they hand you your bag of goodness and you are off.  Simple, frictionless and awesome.   

Improvements can be made in both of these apps to include more of the 4 qualities.  The Starbucks app nails 3 out of the 4, but can do a better job at using the app as a personal, targeted channel.  Right now the offers they have are not very tailored to my experience.  This is a big opportunity to make the app even more engaging.  For Chipotle, they only possess 1 out of the 4.  They might be monitoring my transactions, but they don't have a loyalty program tied to the app, so I am not sure.  The app is a great start, but they could hit a home run with the addition of some functionality.  Either way, I will still use it weekly to avoid the lines.

Using Smartphones and Apps to Enhance Loyalty Programs - NYTimes.com

I am such a big fan of using rewards on a smartphone.  There is no better way to communicate with a customer than with the device they are carrying around in their pocket.  The next evolution for rewards programs is moving from a card in the hand or a punch card mentality to devices that allow even smaller businesses to compete against bigger competitors.  

Smartphones and loyalty apps have begun offering small businesses enhanced program features and automated administration capabilities once affordable only to large companies like airlines and hotel chains. These capabilities also offer the equivalent of a real-world psychology lab for easily evaluating the effects of offerings and incentives on customer loyalty.

The key to any reward program is to capture data about a customers behavior.  If your program isn't allowing you to capture transactional level data in conjunction with the program, there may be a need to consider this approach.  If only to capture the amount spend and the date, this will allow a lot more opportunity for the business.  As I wrote in The True Purpose of a Loyalty Rewards Program, it is imperative to have a program that incentivizes a customer to share their data with you, but not over-incentivize.  The key is to drive behavior by targeting the customer, rather than giving everyone the same rewards.

“Clearly, this is the best of times for loyalty programs,” said Mr. Bolden of the Boston Consulting Group, who recommended that small businesses “focus on the non-earn-and-burn aspects of the program.” He suggested that spas consider a separate waiting room for their app-identified best customers.

“Or when the treatment is over, you hand the customer a glass of Champagne and strawberries,” he added. “If you’re an apparel retailer and you get in a new line from a new designer, invite the top 5 percent of your customers in first so they can see it before anyone else.” The point is that many effective rewards need not cost much to bestow.

Driving behavior is not all about a discount.  Understanding what your customers want and delivering them an experience is more important than a discount.  Because a customer that is coming just for a discount is more than likely not your most loyal customer.

“With apps you now can target specific customers and influence specific behaviors and keep track of all the results and understand the results,” Mr. Smylie said. “Because the check-level detail is now tied to a customer’s profile, we can understand what their purchasing behavior is, what their interests are and cross-reference that against their social media profiles and market to them more effectively and involve them at a deeper level with our brand.”

 

Why Did Facebook Buy WhatsApp?

I have been asked my opinion on why Facebook bought WhatsApp a lot in the last week.  I mean $19bn is a big number after all.  How can a simple app be worth more than many huge corporations that have a history of making money and arguably have bigger customer bases?  I will admit that I do not have the answers, but I have my theories.

First, there has been a lot of talk recently about the under 30 demographic leaving Facebook in droves.  Well I don't know if droves is the right word, but many organizations rely on a metric called "churn" as their main metric, especially Facebook that gets paid by having a large number of eyeballs to create clicks on advertising to make its money.  So the negative churn of the younger demographic has to be a concern to Facebook.  Where are all the Gen X folks going?  They are going to apps, mostly messaging apps.  These messaging apps are building platforms on top of their basic messaging functionality.  This scares Facebook.  So they are going with the Microsoft strategy of buying up the competition.  The big problem I see is WhatsApp isn't the only platform that has a large user base in the messaging space.  So if customers are running from Facebook, then those customers will have lots of alternatives to jump from again, which will end up costing Facebook a lot of money.   

Second, the valuation of companies based on a per customer basis may not be the best metric to use.  I have heard Facebooks value as a company is equivalent to $140 per customer, they paid $105 per for WhatsApp.  That sounds like a great deal right?  The first issue I see is the WhatsApp and Facebook customer base is not mutually exclusive.  Some, and I would venture to guess, most of WhatsApp customers are already in the Facebook database.  So what is the real valuation under this model?  Do you take only the customers that aren't in the Facebook database?  Lets say that is 30%.  Then all of the sudden the WhatsApp purchase is valued at $350 per customer.  Very over priced.  

Third, the biggest bubble I see is the value of large groups of people that aren't willing to buy anything to be a part of the database.  Lets take WhatsApp for instance.  In an article by Bloomberg Technology, WhatsApp has cost phone providers a lot of money in text messaging revenues

Free social-messaging applications like WhatsApp cost phone providers around the world -- from Vodafone Group Plc (VOD) to America Movil SAB (AMXL)and Verizon Communications Corp. -- $32.5 billion in texting fees in 2013, according to research from Ovum Ltd. That figure is projected to reach $54 billion by 2016.

That's a lot of revenue being lost.  The problem with these customers is they are looking for "free" alternatives to not pay the text messaging fees.  I don't know about you, but I hate basing my business off of people that avoid having to spend money, I'd rather have a customer base that spends money.  Most of these customers are young, which tend to not be a loyal group of customers.  They will jump ship at the first sign there is something new and different.  So not loyal and looking to avoid spending money, not the customer base I would spend $19bn for.

As you might see I am not a big fan of this deal.  Of course it will take time to see how this plays out, but I can't see how this will ever make sense for Facebook.  To spend $19bn on something I would want to get $100bn of worth from the deal, I don't see that happening.  I think Facebook has knee jerked a couple of transactions as of late and it will be interesting to see how that plays out.  This is a lot of money for technology that is easy repeatable.  Should be interesting.