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Should You Embrace Pinterest? For Brands and Publishers - (by @baekdal)

Should your business be on Pinterest? Is it really as useful as people make it out to be, or is it just another StumbleUpon that creates a ton of social activity, but no real sale?. The short answer is that Pinterest is worth it, if your brand fits into its very narrow scope. But it is not like most social platforms.

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We Need Editors, But Not Gatekeepers - (by @baekdal)

Last week, there was a good discussion about the need for editors. Poynter has summarized it in this convenient article.

It started with Mathew Ingram, from GigaOm, who asked:

This will be an unpopular question, but why do we need editors? If 'news as a process' is a reality, why not commit errors in public?

When bloggers and Twitter journalists like acarvin make mistakes, they own up to them and correct them in real time -- isn't that better?

Here is my take:

Many think the point of having an editor is to do fact-checking, but I disagree. That is the job of a journalist, and I think it is fundamentally better for the flow of everything to allow mistakes to happen in public.

The very idea of hiring an editor to look over people's shoulders is a sign of distrust. Don't hire editors to check journalists because you don't trust them to do a good job. Hire journalists you can trust!

But we do need editors to secure a consistent high-level of of value and purpose.

Back in 2002, I was the Editor in Chief of a (very) small fashion magazine. My staff consisted of four freelance journalists, and I was an editor in the strictest form possible. I would lay down the editorial direction. I would signoff on ideas before each journalist was allowed to write about them, and I would read and approve each article before it was allowed to be posted. In many ways, just like editors in traditional newsrooms.

When I look back to that experience, I think I made a big mistake. I functioned as gatekeeper, and because of that the journalists where not in touch with the reader, they communicated with me, so they focused pleasing my 'commands' instead of pleasing our audience.

The result was good quality content, but at the expense of any energy between the journalist and the readers. As such, I think this was one of the reasons it never really worked. One and a half year later, we closed it down due to low levels of traffic.

This is not just a problem for newspapers. Whenever a brand decides to have an editor to edit all tweets before they can be posted, the result is always very careful and high-quality tweets that nobody cares about.

In the connected world, it's vital to have a direct connection between the journalist and the reader - and putting an editor in the middle of that is not a good idea. It's much better to have the occasional mistake (which actually adds a personal touch), than having everything edited and made just right.

But we do need editors, not to edit, but to focus everyone around a single purpose. We need them in two ways. First we need to help journalists see patterns that they, as individuals, don't see because they are too close to the story. If Joe is writing one story, and Alice is working on another. It's the editor's job to connect the two. Help the journalists build better stories by finding the connections they didn't discover on their own.

Secondly, the editor's role is not to edit, but to get people to focus on the same purpose. The problem is that if you have 20 journalists, who all write their own stories, you might start out as an interior design magazine, but after a year, they will all have shifted their focus in 20 different directions.

You can't have that. A magazine without a purpose is not worth reading. People don't follow random things.

You have to make sure that the journalists are inline with what you as a publisher are trying to accomplish. You have to follow the same path.

One example is just to look at the mess at TechCrunch, which was essentially caused by lack of editors keeping the journalists align towards a common purpose. Each senior journalist at TechCrunch was essentially giving free reigns to write about whatever they wanted.

The result was that they started focusing on growing their own personal brands. To the senior journalists, Techcrunch was just their personal blog platform. And this was long before AOL came into the picture.

When AOL took over, they needed to make sure that Techcrunch fitted into a much larger content portfolio. They had to make sure every journalist was working for the same purpose and towards the same goal. That was the right thing to do for AOL, but as we all remember, it ended quite badly. All the senior journalists were suddenly told to work *for* Techcrunch, instead of just using it as their personal blog.

We saw just how far these journalists had moved away from Techcrunch's core purpose when they started writing negative articles about AOL.

They were not defending the purpose of Techcrunch. They were defending their misguided believes that they should be allowed to post whatever they wanted - regardless of the purpose of Techcrunch or AOL.

In the end, they all had to leave. But in reality, the damage happened several years before AOL came into the picture.

This is why you need editors. You need to make sure everyone stays true to the purpose of the publication. Not as gatekeepers. Not as fact checkers, and not as middlemen between the journalists and the reader. The role of an editor is to be the ones who motivate and guide the journalists. They help them see connections, patterns, and the trends that are important to the stories - and they form the guiding force to make sure people don't lose track of what the publication is trying to accomplish as a whole.

It doesn't mean the editor have to be a person. If you have a great team, one that is well connected and in tune with each other, you can 'edit' as a crowd. Crowd editing is far more efficient, and far more powerful, but it only works if everyone is motivated by the same purpose.

People need to be united around a shared purpose, and focus on a common goal. That's what real editors do.

It's very important that the journalists can connect and interact directly with the readers. It's important for publications to use the personal influence of an individual journalist to connect and engage your audience. For that reason, it's important that editors do not get in the way but instead function as enablers behind the scenes.

We connect much better with people than with things.

This new role for journalists to directly influence the reader, comes with many great rewards, like a much more influential personal brand, but it also comes at a cost. The cost is that it is now far more important than ever that journalists stay true to the purpose of the publication that they work for. The job of a journalist is not to write. It is to make the publication a financial success.

Believe

As Simon Sinek says, "do you believe in what you believe?" Do you believe in what the company you work for believes?

Simon talks about the Golden Circle. It starts with 'Why', the purpose of the publication. 'How', the strategy of the publication. And the 'What', the actual work of the journalists (in that order).

If you disregard the 'Why' or the 'How' and just do the 'What', you might still create good articles, but you won't help the publication grow. Worse, if you make up your own 'How', you are working against the purpose of the publication.

Of course, it is not one way. It's not just the publication who defines the 'Why' and then demands everyone should just shut-up and do their job. The best companies have a shared purpose, not a dictated one.

But everyone has to agree to believe in what you all believe. And everyone has to express that belief to the people they connect with.

If everyone believes in what you believe, you don't need an editor to keep people on track. You need an editor to help journalists translate the 'Why' to the 'What', by finding the patterns in the 'How'.

That's the role of an editor. That's the role of a publication. And that's the role of a journalist!

Facebook EdgeRank, Promoted Posts, And The Connection - (by @baekdal)

I have spent some time this week discussing Facebook's new feature, 'Promoted posts'. In short, Facebook now allows brands to pay a fee to reach all you fans when they you something.

Today, the amount of people who see your posts is fairly low. The average is somewhere around 16%, which means that if you have 20,000 fans, your real audience is just 3,200 people. That is a significant (and quite catastrophic) difference.

This is nothing new. Every social network has a problem with reaching all your fans or followers.

On Twitter, only a very small fraction of your followers see your tweets. The reason is that if you post something at 1pm, but most of your fans don't check Twitter until 3pm, two hours have gone by during which 20 to 50 other tweets have been posted to the stream. And people simply won't scroll down to find yours.

This is the reason why click-throughs from Twitter is so low. You are effectively only reaching the percentage of your followers who happen to be on Twitter at the exact moment when you tweet. Everyone else won't see the tweet, and thus won't click on it.

Google+ has exactly the same problem, which it tries to solve by creating circles. The circles work in two ways. One, it categorizes people, meaning you divide up your stream in a number of mini-stream. This, in itself, makes it more likely that people will see your posts. But you can also decide how much, or how little, each circle should be featured in your main stream. You prioritize what you as an individual wants to see and what you just want to follow casually.

That is a pretty good concept, and one of the reasons I like Google+.

Facebook used to have the same problem. Only a very small fraction of your fans would see your post, because they would disappear within the noise of the stream. Something had to be done, so Facebook decided to create EdgeRank.

EdgeRank looks at each post and determines how relevant it is to you as an individual. Instead of just showing you what people had posted right now, it creates a curated stream of the most relevant posts just for you.

From a conceptional point of view, this is great. No more noise and Facebook alert you to what's important. It is a brilliant concept!

...in theory.

The problem is that it is far from perfect. EdgeRank is based on engagement, meaning that if you don't engage with someone, your EdgeRank score will drop and filter out future posts from that person or brand.

The concept seems fine until you realize you are devaluating the power of the listener. People in the social world have this strange idea that a listener is a bad person. The industry even has a name for them. They call them lurkers, as if they are some kind of creep lurking around like a criminal.

Here is something I want you to do. Take a look at all your web shop transactions that originate from social channels, and find out how many of your monthly costumers have actively engaged with you.

The answer might come as a chock to you. What you will likely find is that most of your customers never tweeted, never posted, never commented and never liked your posts. But they still purchased your products.

What you will probably find is that only a small percentage of your customers are also engaging with you socially. Another small part is a direct result of that engagement (people 'reached' caused by 'people talking about'). But the majority of your customers never engaged with you prior to buying your products, but they still came via social channels. They are the lurkers. The people who are responsible for most of your sale!!

These valuable listeners are the same people that Facebook tries to filter out with EdgeRank.

For instance, many of my Baekdal Plus subscribers follow me on my social channels, but only a small percentage actively engage with my posts (about 12-14%). The rest, the listeners, just want to follow to keep up-to-date.

People who engage are more powerful per person. But the listeners, as a group, is far more valuable. We should always try to get more people to engage, but doing so at the expense of the listeners is a big mistake - which is exactly what EdgeRank does.

When EdgeRank first came out it was a brilliant idea for a way to solve a very complex problem. But Facebook quickly realized that instead of focusing on finding the really valuable connections, it could be used to help Facebook grow by forcing people to engage socially. This was great for Facebook (it helps them grow), not so good for anyone else. Sure, it's far better than the noise of the past. And it is better than the 'only-at-that-moment' exposure that we get from Twitter. And engaging fans are responsible for the social effect, like when something goes viral and you suddenly reach a million people.

That's all great. But on a day-to-day basis, the listener are the ones who drive the majority of the value.

We need both!

Today, EdgeRank filters out 84% of your fans ...84%!!

Some of the people it filters out are those who have simply lost interest and no longer care about you as a brand. But most of them are listeners. People who decided that they wanted to follow you, but are now filtered out because they rarely engage. But they don't want to engage, they just like to listen!

That's pretty bad. 84% of your audience lost because Facebook decided to filter them out.

You might say, "But this is temporary. Facebook will improve EdgeRank and make it smarter, and thus stop filtering out people who really want to stay connected."

You might be right, but if we look at what Facebook has done so fay, and especially what they have done this week, it doesn't look like they will ever fix it. In fact, it looks like they will use EdgeRank to an even greater degree to force social interaction at the expense of the listeners.

This week, Facebook launched two new features. The first one was that brands can now 'promote a post' for a fee. But unlike Twitter, where promoted posts are intended to reach the people who don't follow you yet, Facebook's promoted posts are designed to reach the people who already follow you, but have been filtered out.

Think about this for a moment. First, Facebook filters out 84% of your fans, and now they want you to pay to get them back. They are filtering out *your* fans. People who have decided to follow you!

Actually, there are two ways to pay for it.

1. Brands can pay to reach their filtered out fans.
2. People can 'pay' by engaging more on Facebook - and turn into active users (which helps Facebook grow).

And the problem is EdgeRank. Facebook now has as financial interest in strengthening the EdgeRank filters. The more people they can filter out, the higher the pressure Facebook can put on brands to 'pay up'.

You might think that I'm exaggerating and Facebook would never do that, but then consider what they did yesterday.

Yesterday, Facebook launched another feature with which brand administrators can see exactly how many people see each post, and exactly what percentage of people Facebook has decided to filter out.

And look what it says underneath: "0% reached through promotion."

This is Facebook using EdgeRank to filter out a big chunk of your fans, and then actively forcing you to buy them back.

Note: On a sidenote, as an analytic freak, I'm absolutely excited about getting such precise data about who sees each post.

EdgeRank used to be a great concept for finding relevance in a stream of noise. But today, it's a tool for Facebook to force people to actively engage (and thus help Facebook grow), and a tool to force brands to pay a fee to reach our own fans.

Facebook has taken control over our connection with our fans. The brands are not in control, nor are your as a fan. As I wrote over at Google+, Facebook has taken our connections hostage, and is now forcing us to pay a ransom.

For brands this is catastrophic. But as a fan it is even worse. When I, for instance, decided that I want to follow Waterfield Design on Facebook, I expected to be able to follow what they do and what they talk about. But Facebook has decided that I'm just a listener and has filtered out many of Waterfield's posts from my stream.

I can then try to keep the connection alive by socially engaging on a continual bases (which I don't want to do), or I can hope that SF bags will pay Facebook to keep me as a non-filtered fan. But it is Facebook who are now in control over who and what I can see in the newsfeed and on what level.

On Google+, I decide who and what goes into each circle, and I also decide how much I want that circle to influence my main stream of updates. On Google+, I'm in control over my connections. On Facebook, I'm not...

Don't get me wrong. I don't think it is a problem that Facebook is finding new ways to earn more money. We all know that their revenue projections are problematic, especially as advertising is not working on mobile devices. Facebook has to find a way to monetize in other ways than ads. A way that works across devices and platforms. Promoted posts are certainly one way to do that.

But, on Twitter. A promoted posts reach people 'outside' your direct connections (the people who don't follow you yet), or via search where a promoted post can be used to respond to people during big events or some kind of crisis. That's great.

That's not what Facebook is doing. Facebook is taking ownership of the connections we already have and selling them back to you. A fan is a fan. Facebook is a platform. They do not have the right to take ownership over whom we connect with. Facebook can charge for features or expanded reach (outside your established connections), but people expect that when they like a brand they are also connecting with it.

One thing I think Facebook should do is to create 'Facebook Pro for Brands'. Brands can set up a page, for free, and use it to engage with their fans. But brands then have to pay $99/year for the advanced features, like Facebook Insights and Analytics, advanced features like enhanced profiles that allows brands to add call to actions (like a 'buy' button next to the like button), or even say that if a brand reaches more than 10,000 fans, it has to pay a fee of 1 cent per 100 fans, per month ($1).

This would mean that a brand like Waterfield Design would have to pay $99 per year, because they only have 2,500 fans. But a brand like Coca Cola, with 42 million fans, would have to pay $50,499 per year. It sounds like a lot, but it is nothing compared to their print marketing budgets.

Another example: A brand like General Motors, who recently announced that they had dropped Facebook ads and only wanted to focus on direct engagement via their page (essentially using the power of Facebook for free), would have to pay Facebook $1,566/year for their Chevrolet Page.

I have no problem with paying for Facebook as a brand, and I think Facebook should do it (also that Twitter and Google+ should do the same). But I find it to be absolutely dishonest how Facebook now uses EdgeRank to kidnap our connections and assume control over who can connect with what.

Debunking The Need For Local Languages - (by @baekdal)

A couple of days ago I had a discussion about language. I mentioned how annoyed I was that a Danish newspaper constantly translated perfectly fine words like 'tablet' into some strange Danish equivalent.

In Danish, a tablet is called a 'tavle computer'. It is not just a terribly long word that is impossible to fit into any UI, it's also the wrong word. A 'tavle' is a blackboard. A 'brt' (in Danish) would be a tablet.

Why do countries spend so much time translating perfectly fine words into something that makes no sense of all?

Let's debunk this language mess...

The evolution of language - 101

A long time ago in a place far, far away, we used to all live in the same place. And since everyone was living in the same place we also all spoke the same language. When someone discovered a fancy new thing, he would name it a 'gobbledygook' and everyone else would agree that this new thing was indeed a gobble..dy...ehm...what kind of duck?

A gobbledygook, he would repeat and everyone would now understand and nod enthusiastically.

But as time progressed and we started to expand into this strange land over the horizon, the distance between us also increase to the point where we could no longer communicate efficiently. One day a person was walking through a valley in a land far away from anyone else, and she found this yellow root with green leaves on top of it. She cautiously took a bite, like it very much, and decided to hence forth call it a 'carrot'.

Why did she call it a carrot? Well, the person who found it was called Caroline, and it was a root. Carrot. It makes perfect sense (and yes, I made that up).

In another valley, very far away from Carolin, a man was walking down a path when he tripped over a yellow root like thing with green leaves on the top. He tasted it, and, being slightly annoyed by his throbbing toe, he decided to call it a 'morot'.

Meanwhile, in another valley, a group of friends were out playing in the sun, when one of them noticed this yellow thing sticking out of the dirt. He picked it up and immediately had allergic reaction and sneezed ...Marchew!!

All his friends looked up, noticed this strange thing he was holding in his hand and immediately decided, mostly to tease him, that it was indeed a 'marchew'.

Everything was fine, and we all started eating strange yellow things that stick out of the ground.

Quite a while later, these three people happened to meet at a big convention of troubadours. Being very polite people, one of them wanted to offer the others a quick snack. He reached into his bag and said, "would you like a morot?"

Everyone looked at him in horror. That is not a morot. It is a marchew. Caroline was fuming, and many other people came over to see what all the fuzz was about. Each one immediate claimed that it was a wortel, a kk, an azenario, a pastanaga, a porgand, a cenoria, a lobak merah and many other variations.

The whole convention ended pretty badly, and people rushed home to tell how awful everyone else was. They put up big fences around their lands to keep the others out, which resulted in country borders, immigration control, and quite a number of wars against those 'other people' who believe differently.

...

I am, of course, just making a joke out of it. But the point is very serious.

The reason why we have language today and use two different words for the same thing, is not because that is a good thing. It is a limitation of the past that prevented us from communicating efficiently with other people. Local languages are a problem, not a solution.

I find it odd when countries and politicians insists that we preserve local languages. We now live in the connected world, and whenever someone discovers something new, we should use the original word that the person created, instead making up our own.

Just think if the economic consequences that local languages have on society. Every person, everywhere, needs to communicate globally by default. But because of the language barriers, kids today have to spend years in school learning that a morot in Sweden is a carrot in England.

What if we instead of language classes had communication classes. Instead of learning different words for the same thing, we would spend our time learning how to use the same words more efficiently. Communication is essential in the connected world, but no kid today learn how to write an engaging blog post.

And the impact for businesses, of course, is even worse. The amount of money that goes into localizing websites and apps is astonishing. And that is not even the worst part of it. One of the reasons why newspapers in Sweden are struggling in the global world, while the Economist is not, is simply that the Economist, written in English, can be read by billions, while a Swedish newspaper are confined to only people who thinks a newspaper should be called a "tidning".

What's worse is all the people who say that their language is part of their tradition. It is, but it is not a good tradition. It is based on the idea that just because you use a different word for something, you are worth more than other people who call it something else. That is a form of racism.

A tablet should be called a tablet, and people should not try to make up their own words for it. And a Kuaizi should be called a Kuaizi.

We should not try to make it harder for people to communicate. We should work together and stop this destructive tradition of languages that forces people apart.

This is the connected world.

The Trends vs Paid-for Content - (by @baekdal)

We are starting to see several interesting trends in the world of publishing. For most of the past 15 years, online publishing has been on a bit of a roller coaster ride. First, embracing the concept of making no money (aka the "culture of free"), only to find that it wasn't profitable. Then, within the past five years, reaching the great depression.

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The Bringer Of News is a Thing Of The Past - (by @baekdal)

For most of the history of the newspaper, the role of the newspaper was to be the bringer of news. The actions of the reporters where to find news and reprint it for everyone else to see.

For that reason, most journalists believe that whenever they see something, they have the right to reprint it. That's their purpose. To be the bringer of news.

Other people, brands, businesses, and organizations thought the same thing. Whenever they did something, they expected and even hoped that a journalist would come by and take and republish it to the public.

The problem is just that, in the connected world, this whole business model is collapsing. Today, everyone can be a journalist, and everyone is. And reprinting what someone else did is no longer acceptable.

The newspapers no longer have the right to take someone else's work and reprint it for their own profit. That is copyright-theft but, more importantly, it is connection theft. You are stealing the direct connection between the creator of the work and the people it connects with. That is far worse than copyright theft.

One person, Duane Lester, had one of his articles stolen by a local newspaper and decided to confront them about it. It makes for a spectacular video.

The most telling thing is the reaction of the editor. In his mind, he went out to the public (the internet) found some news, and decided to bring it in his newspaper. 20 years ago, this would have been perfectly acceptable. It was even expected of him. That was what newspapers did!

But today he is a thief, and he simply doesn't understand that. Instead, it looks like the editor feels that it is his rights that are being violated. And after not wanting to take up the fight on camera, he reluctantly signs a check and tells Duane to get his ass out of his building.

This is not just a problem with traditional print papers. Recently we heard about how The Next Web did the same thing. You can read the story here, and the editor's response here.

Again, the editor fully believed that he had to right to do it.

Harrison Weber (our author) decided to paraphrase and clearly didn't do a particularly good job. I don't however think that it warrants an all out plagiarism attack.

Paraphrasing is just another word for stealing someone else's work and then hiding it by changing a few words here and there. And the editor of The Next Web is far from alone in thinking this is acceptable behavior.

Clashing cultures

This is the culture clash between the traditional and the connected worlds. In the traditional world, you are the bringer of news. In the connected world, you are a copyright and connection thief.

Duane's example was between a blogger and a newspaper, a case that is easy to understand. But think of the many similar cases between brands and newspapers.

Today, many brands spend more time communicating directly with their customers, instead of issuing press releases. Which means that brands are just like bloggers: Independent publishers of content. They publish content on their direct customer channels - their blogs, Facebook and Google+ pages.

When brands publish an article to their fans, they do so with the expectation of strengthening their social relationship and reach. If a newspaper then comes by and reprints it on the newspaper's site, it is stealing the content and the direct connection.

Most brands today still think of social media as a form marketing, and, as such, they don't mind when other people 'steal' their content because it gives them free exposure.

But it won't take long before the brands will realize that when newspapers take their content, they not only steal the content and the connection, they also disrupt the call to action - and that is a disaster.

This culture clash, from newspapers having the 'God given right to report on other people's content', to the connected world where they don't have that right at all, is not going to end well.

Already today we see the battle between the bloggers and the newspapers (which goes both ways), but I fully expect the first brand vs newspaper battle to emerge in 2012. At some point in the months ahead, a big popular brand will get so fed up with a newspaper taking content from their direct customer channels (blog, Facebook page, Google+ page) and sue the newspaper for copyright theft.

Imagine if a big company like H&ampM sued a big newspaper for lifting an article of H&ampM's Facebook page. It will happen, maybe not by H&ampM, but by some other big company. And it will happen soon.

When it does, it will question the whole existence and future role of the newspaper. Brands will realize that it is more valuable to keep the connection than to lose it for a short-term gain of free exposure.

My advice to you is simple:

To brands: Start calculating the impact (positive/negative) of other people republishing your posts - including when newspapers reprints or paraphrases one of your stories. What is the exposure vs conversion rate? Do you win or lose? Are you gaining a new audience, or are you just giving a newspaper free content that they can profit on without getting anything useful in return?

To Newspapers: Stop being the bringer of news. The business model is based on the disconnected world, and the future trend patterns all lead to a culture clash that you can only lose. In the connected world, everyone is a creator with a direct connection to their audience. Exposure happens via sharing, not republishing.

You have to be the creator of news. Expand the stories, find the connection between stories and be the source. You can build on a quote, but you cannot republish or 'paraphrase'. And you cannot steal the direct connection.

The future looks brighter than ever, but the past isn't. Being the bringer of news is a business model of the past. Change it!

The Silicon Valley Dance - (by @baekdal)

For the last couple of weeks, I have been writing and commenting on the social bubble. We all know that it's here. The signs are as clear as day. But there is something wrong with this bubble. It isn't actually a bubble for anyone who is in it. It is only a bubble for the rest of us, and the market as a whole.

What we are experiencing is the what I will call the Silicon Valley Dance, and here is how it goes.

First a bunch of startups all try to do something spectacular, and they pitch their ideas to angel investors hoping to get funding to get it going.

Most of these startups don't make it and are not invited to the dance - but the few that do are invited into a strange world of tech investments.

The first steps

The first few steps are simple. The startup, now monetized by their angel investments, set out to create this amazing new thing involving new technology, new ideas, and new social doohickeys. In order to attract attention, they decide to give it all away for free. They do not even put ads on it. We see statements like. "This will be free, forever". And the founders say things like, "We don't like advertising, so we won't do that, ever!"

People, of course, are very excited by this free gimmick. It's new and exciting (and everyone loves that), and it is totally free - made by people who wants to keep it free forever.

The result is an incredibly initial growth curve. And since it is build around social sharing, it very quickly explodes in size.

Soon the journalists notice this new thing and write amazing articles proclaiming that this startup grew 4,000% the last 3 months alone (which is really easy to do when you start from zero).

The next act

The startup now needs to scale. They need bigger servers, support crew, and a bunch of other things in order to support this new 'social comet'. In short, they need to raise more money.

This, however, is easy. Because with a grow curve showing a 4,000% growth, the investors see billion dollars signs falling from the skies. Based on their initial numbers, it is decided that the company will grow by some even larger number, and base on that they set a completely made-up market valuation of something in the area of a billion dollars.

They then invest $100 million into the company (10 times lower)

The result is that the investors can invest in a company at a fraction of the price that they tell the world that it is worth. What a brilliant deal, especially since all the numbers are made up.

It's like buying a car for $10,000, and then telling people it is worth $100,000.

The startup continues to focus on growth and deliberately implement things that will boost traffic even higher, while neglecting to consider anything that could produce real money.

The final act

A while later, the small startup has tens of millions of free users, and it is now ready to be sold to some big clueless company who themselves have failed to embrace whatever the startup had invented.

The investors sit down to have a meeting with a big investment bank, and they decide that the company is now worth 50 billion imaginary dollars - and they base it all on its amazing growth as well as its track record of being valuated at an ever higher price at each investment cycle.

Just look how amazing it is growing. The first investors invested just a couple of thousand, then it was valuated at $100 million, which attracted even more investors, who invested $10 million, and now it is worth $1 billion! All imaginary valuations based on a company that makes no money at all.

The next day, the company is sold for a staggering amount of billions to some big company, and the founders become billionaires - and so do the initial angel investors and early investors.

Everyone is happy. The founders turn into venture capital investors themselves, and start looking for the next free-for-all-new-amazing-social-startup-with-no-revenue to invest in.

And the cycle repeats.

As you can see. Without actually making any money, at any point, a company was formed and later sold for billions of dollars - making both the founders and the investors filthy rich. And they can keep doing this as long as there are new startups coming out with new ideas. There is no bubble here. It actually works.

Being a venture capitalist is a tremendously successful business model.

But what about the big company who just paid several billion dollars for a startup with no revenue? Well ...this is where things start to go horribly wrong. The only way to somehow get this money back is to find a way to monetized all this free traffic.

They start with advertising, which results in a massive backlash from the people using the service, who say that this big company doesn't care about them and are only in it to make money - and many other arguments like, "they are breaking with the culture that the startup was founded on".

The big company is identified as the ultimate villain. Employees drop out and post negative articles telling the world that the reason they left was because of how 'corporate development' changed everything - and that sucked, so goodbye!

A few years go by, until finally the big company simply decides to write that 'experiment' off as a failure. They never succeeded in monetizing the traffic.

Why did it fail? Part of the reason is that the big company completely failed to understand the mechanisms behind it. If they did, they would never have bought the startup at that price to begin with. But the biggest reason is that it was based on imaginary value. It made no money, and its users have been taught to expect everything for free. That is not an audience or a product that can be turned into something that will ever be profitable.

The initial founders and investors don't care about that. They already earned their billion dollars. They are currently building up new startups with, no revenue and promises something new for free, only to pitch the idea other big clueless companies for imaginary market valuations far above the amount of money the investors have actually put into it.

The cycle continues endlessly. The bubble never burst as long as there are more clueless corporations waiting inline to buy the next innovative idea.

Nevertheless, the bubble will burst the day the big clueless companies start to use their brain. That's when this whole industry will come tumbling down. The day investors can no longer make up imaginary value is when it will all fall to pieces.

Personally, I cannot wait for this to happen. Just imagine a world where startups where based on creating something people would pay real money for, generate real revenue and produce real profit. These startups would have to build something that was far better to begin with. Something far more useful, and far more valuable.

Imagine a social network that had to be so good that you would pay real money for it. We used to do that in the past, but then came the Silicon Valley Dance.

The Silicon Valley Dance is also largely responsible for the culture of free. It is astonishing how many 'ordinary' people who believe that sites like Pinterest is worth their new $1.5 billion market valuation.

Ordinary people point to the fact that billions of dollars are exchanging hands, and the constant stories of founders getting filthy rich. But they didn't do it because they made something valuable. They did it because they fooled some big company into believing that their free traffic was worth something it wasn't.

The problem is that, in this kind of environment, it is almost impossible to create a real startup that makes real money. You have to compete with a bunch of startups with fictional financial valuations who gives everything away for free.

It's time for the big companies to wake up. While I wouldn't mind having a billion dollars in my bank account (which I don't), I would much rather spend my time building something of real value. Something that generates real money because it is really worth the price!

A company is not successful if it makes no money - regardless of how much imaginary value the investors tell you it is worth. It is a simple scam, although a highly profitable one for the investors.

It's the Silicon Valley Dance.

1...2...free...grow it some more...4...5...6...valuate the floor
1...2...free...grow it some more...4...5...6...valuate the floor
Sell it to a big fool, because that's really cool.
1...2...free...grow it some more...4...5...6...valuate the floor
1...2...free...grow it some more...4...5...6...valuate the floor
Sell it to a big fool, because that's really cool.

...and repeat

The Facebook IPO - A Classic Game of Hot Potato - (by @baekdal)

For those of you who are following me over at Google+, you will already know the story. The Facebook IPO is the closest thing we come to a social bubble. The numbers and valuations they throw around are just insane.

To illustrate this, I decided to compare Facebook with Ford by looking at four key metrics: Revenue, profit, assets, and market cap. And as you can see, something is completely wrong with this picture.

• Ford has 36 times higher revenue
• Ford has 8 times higher profit
• Ford has 8 times as many assets (including a much larger cash reserve)
• ...but Ford is valued at only 41% of Facebook's expected market cap.

More to the point, Ford's market cap is valued at 70% of their total assets, yet Facebook is valued 1,370% higher than what they have in assets.

This is the dot.com era all over again. Value is being determined based on activity (page views, ad impressions, users), instead of real things like ...you know ...money and assets.

My post over at Google+ went crazy after posting this graph, within 24 hours it had a ton of views, 660 +1s, 595 shares, and 170 comments.

The comments were divided into two camps. One group agreed that this was insane, the other told me that I was wrong because I forgotten about the growth potential.

But I hadn't, I just didn't mention it. As I wrote in another post:

While I agree that Facebook will grow, they are only making $1.21 per person ...and they seem to be stuck at that level (it was $1.26 in Dec 2010).

That means that in order for Facebook to earn the same as Ford, they would have to reach 7.7 billion people - 110% of the entire population of the planet, or 300% more people than there are on the internet.

If we instead compare it to Google, they would have to reach 8.3 billion people. And compared to Apple, they would have to reach 22.5 billion people....or 321% of the total population of Earth.

If we instead look at revenue, the picture is even worse. Facebook would have to reach 33 billion people to match Ford, 9 billion people to match Google, and 26 billion people to match Apple.

The problem is that people only look at the growth trend itself (which looks to be impressive). But in doing so they don't realize that Facebook already has a 40% internet penetration - worldwide. That's impressive, but it also means that its growth is somewhat limited.

The only way for Facebook to succeed, at its current market cap, is if they can raise the $ value per user, and so far they have been completely unable to do that. Facebook is not actually growing that much, which Facebook itself have illustrated clearly on several occasions.

Here is the graph showing the growth in monthly active users:

Note: Sorry for the low-res quality - out of my control.

As you can see, the US market is flattening out, and Europe is not far behind. And while Facebook is still growing overall, it is nowhere at the exponential rate that people think it is. It is a steady increase month over month, with a slowing effect in their existing markets.

For a company that only makes $4 billion in revenue, I don't see it coming anywhere close to a $100 billion market value anytime soon.

More importantly, the revenue is actually down, and the revenue per user is flat. Here are the official revenue graphs:

Notice the small numbers underneath each graph, the one that says ARPU. It is short for Average Revenue Per User. As you can see, the ARPU has been flat lined for more than a year. But more to the point, the new market (where Facebook is still growing strong) have a much lower ARPU per person ($0.37) than the old market ($2.86).

This means that even with a steady influx of new users, the new markets are not nearly as valuable as the old ones.

There is no spectacular growth here, nor is there any trend curve pointing in that direction.

Don't get me wrong, Facebook is a very financially sound company. It has very good positive cash-flow. The cost of operating Facebook is dropping compared to their revenue. In 2009, the cost was 63%. In 2011, it was 52% of the revenue. And while the cost per user is up (in 2009 the cost was $1.4 per person and in 2011 it was $2.2 per person), the revenue has grown at a higher pace.

Facebook is a financially sound company and is doing great!

The problem is the stock market valuation, which is completely out of touch with reality. They are looking for a quick-win, and Mark will soon be a fanzillionaire - literally. This is because much of the value is made-up, but also because it is based on some imaginary value of fans and not real things like actual money.

What we have is a real bubble, which is further cemented by the $1 billion purchasing price for Instagram - a company that had no revenue at all. And today we learned that Pinterest has raised $100 million at a $1.5 billion valuation. Where do they get these silly valuations from?

For years we heard that all these social signals are incredibly valuable. If you have enough signals, you can use it for targeting, and money will fall from the sky. There is just one problem. We have not seen a single example yet that this true. Not a single company has been able to monetize these social signals in any useful way that results in real money at the level that these companies are being valued at.

All the successes we hear about are happening between investors and companies buying imaginary value. Instagram is not a success. It made no money! As a person, I absolutely love Instagram. But why would I pay for it? Why would I click on random ads from brands I don't care about? Would you?

It's the same with Facebook's IPO. People say it is going to be extremely valuable because of the open graph and all the information they have about everyone. And it is valuable - Facebook earns $1 billion per year, 86% from advertising. But there is a long way from $1 billion to $100 billion that the stock market thinks it is worth, and nothing as yet indicates that Facebook can grow by that much.

Advertising click-through rates are dropping on Facebook, which they tried to solve by putting more ads on the page. That might work in the short term for Facebook, but it is an absolute disaster for the brands who now have to compete with more advertising spots.

And this week, GM announced it was dropping Facebook ads altogether but would still use Facebook to post status updates. Essentially saying they want to use the power of Facebook, but not pay for it.

Facebook has a problem. As you can see above, the new market is not as valuable as the old one, and the old market is slowing down. At the same time, the $ value per user has flat lined.

Facebook needs to come up with a way to earn much more money per user to even reach their expected growth. And they are trying with 'pay to highlight', asking people to pay $2 to have a personal post highlighted for their friends. What a strange concept. Paying Facebook for having your friends notice what you write about. If you friends ignore you, the solution is not to pay Facebook, it is to get better friends (or at least write better posts)!

One possible solution, in my opinion, is for Facebook to create a Pro version for brands. That's where the value is. More brands will do what GM did - drop advertising and focus on direct engagement.

And, of course, I haven't even mentioned mobile, where Facebook makes no money at all. Display advertising and mobile is completely incompatible. And where is the mobile trend heading? Yep, to more mobile.

I'm not saying that investing in Facebook is a bad thing. It's a game of hot potato. If you buy it now and you are capable of selling it to some poor fool for an even higher evaluation before the next earnings call, you will have earned a lot of easy money.

But by the next annual earnings call, when Facebook fails to exceed expectations, things will come tumbling down, and whoever is left with the hot potato is going to get burned - badly.

Marks Zuckerberg, of course, will still be filthy rich. He was the first one to sell the hot potato. He figured it out!

Read also: The Facebook IPO: A Note to Mark Zuckerberg or, With "Friends" Like Morgan Stanley, Who Needs Enemies? (thx avinash for the heads-up)

Google Consumer Surveys For Publishers... Really? - (by @baekdal)

When Google launched 'Google Consumer Surveys for Publishers' I was pretty sure it was some kind of April fools joke. And even it wasn't, publishers would surely not buy into it. So, I ignored it.

But it wasn't a joke. Many publishers are seriously considering Google Surveys, and some are even using it. On top of that, several of my readers have been sending me links to it, and asking me to write an article - so, I couldn't ignore it any longer.

Is Google Surveys a good idea? Are you kidding me? It's crap ...and here is why:

If you don't know what Google Consumer Surveys is, here is the short version. 'Google Consumer Surveys for publisher' earn money from content, by having people answer a question before they can read the article. The questions themselves are asked by brands, who wants to know all kinds of strange things. The brand pays 10 cents per question answered, and the publishers then get a cut, with Google taking an 'administration fee'.

On the surface, it looks interesting. People can read premium content without all the hassle of a paywall, or actually paying the publisher any money. Instead, they 'pay' by answering a question. Brands, eager to do focus groups in a cheaper way, can crowdsource their questions and get a ton of answers in return, for almost no money at all.

Everyone is happy ...except of course, the people, the brands and the publishers.

So what's wrong with it?

Let's start with the 'Culture of Free'. The number one thing that is decimating the publishing industry today is the continual motion to convince people that content is not worth paying for.

We have proven that this 'idea' of free content in exchange for non-monetary actions is not a workable solution. We learned it during the first dot.com bubble. We have learned it with advertising, where print dollars amounts to digital pennies, and we are learning it with every other form of 'free' that is out there.

Free is not a sustainable business model. Just look at the media industry. Free does not work, so stop trying to find new ways to do it. You are not helping, you are making it worse.

The problem with free content is that the only way to make it work, is to lower the value to a level low enough that the article no longer worth reading. How many times do publishers have to shoot themselves in the foot, before they realize this.

See: The Page View Conundrum and The Traffic Whores.

If you try to optimize free content monetized by 3rd party revenue, like advertising or surveys, you are in the business of optimizing page views. This is the only tool available to you, when you are paid based on volume and not quality. Which means that you are on a direct path to becoming another Demand Media type of business.

Why would you do that? Why would you give up everything you believe in for the short term gain of earning a little bit of extra money? Why would you put your business on a path where everyone is doing the same low-quality pageview-optimized link-bait content.

Why?!!

What about the brands using it? Isn't Google Consumer Surveys useful for them? Isn't this valuable?

No. Not even close.

First is the problem of the questions themselves. You can only ask one question but, as we all know, that is not useful in any way. To get a useful answer, you need to ask at least two questions. The first being, "What do you like the most? A or B?". The second being, "Why?"

Here is an example that Google highlights in their description. A brand asks if people would be more willing to buy a product if one of two stickers where applied to it. And the brands will then get a ton of answer back, telling that one of stickers was better than the other.

What they lack is 'why'. Why is one sticker better than the other? They have no idea, and as such the brands don't learn anything new. It's doing business blindfolded. If you don't know why something works, how could you possibly succeed in the future? How could you be the brand that people wants to follow?

It's just stupid! You would be far better off doing a real analysis, even though it would also be much more expensive. You need to learn why, otherwise you have a correlation but no causation.

Another thing. What is the absolute number one thing that people hate online? In 1999, it was splash pages. Pages that would get in the way of the actual content that people tried to see. In 2005, it was ads that took over the page, and had to be dismissed before people could read the article. What do you think it will be in 2013? Yes, you guess it. Annoying surveys that constantly get in your way every time you click on a link.

Haven't we learned anything? The worst thing you can do online is to get in people's way by interrupting them with irrelevant distractions.

And what do people do when they are being constantly annoyed online? They find a way around it, with ad-blockers, extensions, etc.

If they cannot find a way around it, people fill it with crap, just to counter the annoyance.

One example of this is what we experience on every single gaming site. When you go to a site about games, you are usually presented with a box asking you to confirm your age.

How many times have you answered this correctly? Sure, you might have entered your correct birth date the first time you ever encountered this question, but the second, third, fourth and fifth time you would just entered some bogus date to get in. Some even go a step further and deliberately enter a wrong date, just to mess up the data.

People hate this stuff.

It will be the same with Google Surveys. The first time you see a question, you might answer it correctly in relation to what you really feel. But then when you are being asked again, and again, and again, people will either answer wrongly on purpose, or just answer randomly without actually reading the question first.

The brands will get a ton of result that they cannot use. Worse, the answer might actually tell them the exact opposite of what they need to know. But as a brand, you have no idea if the answer are what people really feel, the exact opposite of what people feel, or just some random answer by people who don't care - or a mix. You don't know how inaccurate it is, and as such you cannot use it.

Google Surveys is just terrible. It annoys your most important asset (your readers), it misleads your partners (the brands), and it forces you as a publisher to focus on volume over quality, which reduces the overall value and lower how much people trust your content.

The only one who wins is Google, who will earn a ton of money watching clueless publishers and brands shoot themselves in the foot.

I love Google. I think it is one of the most respectable and brilliant companies on the planet. Google+ is my new favorite place to be. But Google Surveys is not a good example of what Google's core values are all about.

If you want to make money from content online, you need to do two things:

1. You need to demonstrate that you are providing value, by consistently producing content that is worth paying for.
2. You need to create a clear line between something that is worth paying for, and the actual payment of real money. People need to realize that the only reason why they can read something is because they have paid for it, or because someone else has paid for them.

The reader must never be in doubt that the content they are reading is worth something, and has to be paid for. If people get the idea that something is free, then you have failed.

People who answer a question don't think of it as payment. They think of it as an annoying obstacle put in front of them by selfish brands who don't care about their time. None of the people who answer these questions will later turn into paying subscribers, because you created the wrong relationship to begin with.

Valuable content is made for the convenience of the reader. It has to be worth paying for, and it has to make life better, simpler, and more convenient when you buy a subscription.

Google Consumer Surveys is not helping...

Social Engagement is a Post Conversion Activity - (by @baekdal)

One of the main problems with how brands use social media is that they do it too late, and they target the wrong people. Social media is very different from other types of media. It starts as a post-conversion activity whereas all most forms of media starts as a pre-conversion activity.

You cannot start something with social. You continue it.

How it works

Traditional media is a pre-conversion activity. It what you do *before* a sale (a conversion). It's an activity designed to create awareness through exposure to people who don't know that you exist.

The aim, of course, is to get people to a point of sale. To get them to convert into customers.

But because traditional marketing is based on reaching 'strangers', the actual conversion rate is usually pretty low. And when we do it online, the conversion rate is pitifully low due to the quantity of marketing messages we are bombarded with each day.

As the volume of media channels increase, the effectiveness of traditional marketing plummets. The graphic below illustrates how many advertisements there are in a single issue of Vogue. That's 165 ads out of 324 pages (49%).

Note: from Dissecting a Print Magazine.

Worse is the shallowness of the relationship. Traditional marketing stops once you have convinced people to buy a product. We then hope that the experience will some day cause people to come back, but brands don't do anything to make that happen. Traditional marketing is one-way only, and it ends with a sale. The next day it stats up again, from scratch.

Traditional marketing is not very efficient.

The list

A better solution is to shift focus from pre-conversion to post-conversion. It started in the simplest way. Grocery stores would give people a card that would provide 'membership' discounts. Other brands followed by creating VIP clubs for their existing customers. The idea was to continue the relationship and get people to come back. In industry terms we call this 'list building'.

The result is amazing:

With traditional marketing, you have to spend 99% of your time creating awareness, but with list building, you are reaching people who are already aware that you exist. Meaning that you can focus most of your attention on building up long-term value. Give people something that would cause them to continue the relationship, instead of restarting it.

The result is a dramatically higher conversion rate per person. Coca Cola explained this in a very simple way with the following slide.

This is the difference between traditional marketing and list building.

The catch is that until you have build up a sizable list of people to reach, your list building efforts will not have enough volume to make a difference in sale.

Unlike traditional marketing, where you can just buy exposure for one million people, with list building you have to earn it first. You have to do something that is so good, that it persuades people to join your list. Which means that the most important element to list building is not selling a product, but how you treat people during the initial phase of your relationship.

List building is a long term strategy, and it takes a long time to get started. But once you get it going, the result is spectacular.

There is also another catch to traditional list building. It cannot grow by itself. Having people sign-up for a newsletter only works for the people who are on it. There is not growth or influx of new subscribers. It is a closed loop that doesn't expand your audience. To grow you still need to turn to expensive traditional marketing.

The social list

This is where social media comes into play. Social media is a public list that grows through sharing. Social is not marketing it's relationship building.

And the way it works is like this:

Compared to the old list building methods, social media is about a billion times more exciting, and it changes the game quite dramatically.

First of all, the actual conversion rate of social engagement is often much lower than with traditional list building. The reason is simply that social is much easier to do, and thus attract a far more diverse group of people. The traditional lists only include people who really, really like you. But on social channels, hitting a like button is easy.

This is why you see so many people argue that email is still the most important channel. If you only look at the conversion rate, email works far better than social.

The upside, of course, is that social media has the potential for a much higher volume. For instance, I have 30 times as many social followers than people on my weekly email newsletter. And while my newsletter's conversion rate is 4 times higher than social, the sheer volume of social traffic completely dwarfs the newsletter's conversion rate.

An exciting factor of social is that it isn't limited to your list either - aka the number of fans or followers you have. People can like a product without being customers, and they can like it without being a fan. And since sharing creates exposure through personal recommendations, the resulting pre-conversion rate is much higher than with traditional exposure.

What we have is potentially a perpetual engine. Once you get it started, the outcome is higher than what you put into it.

While social media works on many different levels, the social media that you can do, as a brand, starts as a post conversion.

You start it by building a 'list' of people who wants to follow, like, fan, or circle you as a brand. You then use this list to create value, instead of exposure. It's like email lists, you are wasting your time if you just give show people advertisements. People already know who you are, that's why they decided to follow you.

But now comes the magic of social. Unlike traditional lists, social results in sharing, and sharing result in additional exposure (a pre-conversion effect). This in turn leads to more sale, more people following you, more people sharing, a higher pre-conversion rate, resulting in a higher sale, more people following you ...and et cetera, et cetera...

Unlike traditional lists that cannot grow without the support of traditional marketing. Social media encourages growth by default.

You cannot start anything with social

There is, of course, a catch to all this social bonanza. While social media can happen on every level, the social media you do as a brand, starts with you building up a group of followers.

If you are starting from nothing, having a 7% return rate or a 5% sharing rate is still nothing. Social media works the same way traditional lists building. Without a list if followers for you to reach, you will have zero effect.

This is the main problem that I see when brands and startups do something new. They think they can just create a social campaign, and the viral effect will take over and shower them with gold. Same with advertising agencies who just encourage brands to do social gimmicks.

You first have to build up a social list!

Here is an example. Jamie Oliver recently announced something new on YouTube:

So did Felicia Day with her new podcast network Geek and Sundry:

Note: For some reason YouTube's embed code only works in some browser for Felicia's video. But here is a direct link.

So why can Jamie and Felicia start something using only social media, when I just said that you cannot start anything with social?

The answer, of course, is that they didn't. Both Jamie and Felicia has a social list of about 3 million followers on several social channels. So while they are launching something completely new, they are using their existing social lists to get the word out.

And, notice how both Jamie and Felicia started creating awareness about their new projects a long time before they launched. They know that even with 3 million fans, you need months of preparation to get enough people to start following their new projects. They are using their old lists, to build their new lists so that when you reach the day of the launch, both lists will have enough momentum in them to create a spectacular launch.

Social media is a post-conversion activity, and it won't work until you have a social list of followers to reach. You have to start your social adventure by building up a list. Only then can you use it to grow your business.

Breaking Down the Media Silos: Connecting a Mixed-Media World - (by @baekdal)

In The Shift, I wrote about how the new media world is breaking down the traditional media silos. Not just for the media themselves but also by brands, organizations, and for the public as a whole.

Baekdal Plus: Read the rest of this article in Baekdal Plus

Helping the Environment By Making it Worse - (by @baekdal)

This morning my stream was filled with all kinds of studies and new research (as it is most mornings), but today, many were missing some vital element that put the results into the 'not helping' category.

Let me give you an example: Researchers from Cambridge University have found a way to remove toner from laser printed pages. The idea is intriguing. With this technology, you could effectively buy a printer that would first detect and remove any print already on a page, before printing something new.

It's the un-printer. Amazing!

The results showed that toner-print can be removed effectively without causing significant paper damage, allowing the paper to be reused, without being discarded, shredded or sent to a recycling plant.

But one thing is missing: What is the cost of un-printing compared to processing several tons paper at a recycling plant? Without knowing this, we cannot determine if this is a great invention or just a massive waste of money.

Obviously the cost of un-printing is probably very low (it's just electricity), but so is the cost per page for recycling paper at recycling plants.

I don't know the answer, but I think it is entirely likely that it is cheaper and more environmentally friendly to recycle paper by the ton (at recycling plants), than asking each person to buy an un-printer and recycle one page at the time at home.

The researcher should have included this vital data into his findings.

We see the same in many other areas, for instance with the many iPhone solar chargers - especially those designed to be used indoors and sold to people for 'environmental reasons'

The cost of charging an iPhone is just $0.000862 per charge, but an iPhone solar charger, like this one, is $50. That means that you can charge your iPhone 58,000 times using the electrical grid for the same money.

If you charge your iPhone every day, the electrical grid outperforms the solar charger in cost-efficiency for 158 years.

Buying this to save money is just silly.

But what about the environmental cost? Well, that's tricky to calculate. First of all, only a small fraction of your electrical bill is harmful for the environment. Most of the cost is administration, employee salaries, equipment, infrastructure, etc.

We have to compare the actual pollution generated while charging a single iPhone vs the environmental cost of manufacturing and distributing an iPhone solar charger.

But consider this. The cost of charging an iPhone is 8.8 Wh, which mean that its carbon footprint is about 1.62 grams of CO2. Compared to a semi truck, which produce about 715 grams of CO2 per mile driven.

If the truck delivering your solar charger has to cover 50 miles, you could charge your iPhone 21,000 times using the electrical grid...and still pollute less. Or charge your phone for about 60 years.

We are not solving the right problem it just looks like it. It's an illusion. If you go out and buy an iPhone solar charger, you are actually making things worse. You are not going to use the charger for more than 60 years.

Use the electrical grid. It is far cheaper and more environmentally friendly than anything else out there.

If you really want to save the environment, use energy companies that produces green energy, like wind power or even solar power at scale. Same with the un-printer. Don't buy a printer to un-print. Recycle and let the recycling plants do it for you *at scale*.

Or even better, plant a tree!

How many trees do you need to plant to offset the carbon emission for charging your iPhone? The answer is 0.0004 trees per charge ...or one tree every 7 years. And buying a tree, for instance, to be planted in the Brazilian Rainforest, is just $1, so spend $10...or $100.

There is no question that we need to save the environment and that pollution is a problem. But we need to solve it at scale. Startups who try to solve it by giving people gadgets to put inside their homes are not creating the right solution. They are making things worse.

XD Design, the company behind the iPhone solar charger, had all the right intentions, they just didn't think. They only looked at half the data. It may be the same with the un-printer. The researcher had all the best intentions, but he too is also only looking at half the data. They are not solving the right problem.

What I really want to see, however, are startups who try to solve this at scale. Think big! Put up mile long underwater propellers directly in the line of the gulf-stream or something. Put steam pipes into a volcano.

And while you do that:

• Invent a new type of battery.
• Reduce the energy needs of our devices and machinery.
• Use the excess energy that is happening everywhere.
• Put solar panels on every roof.
• Put small electric generators in the sewers, so every time you take a shower, you are actually producing electricity.
• Put an electrical conductive layer under every road, one that produces electricity when you apply pressure from cars driving by.
• Put a solar panel on every light post.

But whatever you do, solve the right problem...

Top Management's Fear of Long Term Risk - (by @baekdal)

Back in 1992, The city of Las Vegas had a problem. The Las Vegas Strip, with all its fancy casinos, was decimating downtown Vegas. So the city invited architects and planners to come up with ideas for the 'Las Vegas redevelopment competition'.

The result was what we today know as the Fremont Street Experience, which is just a mall. The 'experience' itself is a large canopy. It's 27 meters wide (90 ft) and 460 meters long (1,500 ft), with 12.5 million LED embedded displays. It's impressive, but not that exciting.

And it wasn't the real winner of the competition either. The city wanted an entirely different and much larger project, but they where blocked by a CEO who didn't dare to take long term risks.

What was the real winner of the Las Vegas redevelopment competition? It was a real-sized replica of the Star Ship Enterprise. The size of it was immense. The Star Ship Enterprise is the same length as the famous ocean liner RMS Queen Marry, the Eiffel Tower, or about 90% of the height of the Empire State Building.

This was a great vision for downtown Las Vegas. It would have been a phenomenal success, considering that this was planned during the absolute highpoint of the Star Trek franchise. So why did they end up with a canopy with some pictures on it and not this remarkable project?

Gary Goddard, the designer, tells the story of the final days before it was dropped:

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The Las Vegas downtown redevelopment committee had made its decision, along with Mayor Jan Jones. I was called to a meeting and told, privately, that THE STARSHIP ENTERPRISE was the choice of the committee, but they wanted confirmation that Paramount would indeed approve the deal. While Paramount Licensing loved it, and Sherry Lansing (then President of the Studio) loved it, it was made clear to us that a decision of this magnitude would need to have the approval of the Studio CEO who, at that time was Stanley Jaffe.

To make a long story short, Paramount (Licensing) and the redevelopment committee negotiated a basic deal, subject to the approval of the Studio Chairman. The Mayor of Las Vegas was involved and had also approved the basic deal. So everything came down to a major presentation at Paramount Studios on one weekday afternoon.

The Mayor flew in on a private jet along with the representatives from the downtown redevelopment committee. Sherry Lansing was there, the Paramount Studios licensing group executives were there, several key executives at Paramount were there, and of course, Stanley Jaffe, the decision maker. To be clear, EVERYONE loved the project up to this point " the entire Vegas downtown redevelopment committee loved the concept, the Mayor loved it, the Paramount Studios Vice President of Licensing and the entire licensing department loved it, as did Sherry Lansing. Everyone loved it " but now it was up to one man. Stanley Jaffe.

And I will never forget this meeting.

All of our work, the effort to get Paramount, the Mayor, and redevelopment committee aligned, everything had come to this moment. We were ready to go. Money in place, land provided by the city, license for the property negotiated with Paramount licensing " all set. If Mr. Jaffe says "yes" and we are a "go" project. And the city wanted to have a press conference within a week announcing the project.

So with everyone in the room, I take Mr. Jaffe through the project. With the art, the plans, the overall concept. After my spirited "pitch" everyone was beaming " everyone except Mr. Jaffe. Mr. Jaffe thanked us for the effort, and he congratulated us on creating a bold concept and presentation, and then went into a speech that went something like this:

"You know, this is a major project. You're going to put a full-scale ENTERPRISE up in the heart of Las Vegas. And on one hand that sounds exciting. But on another hand, it might not be a great idea for us ...for Paramount." Everyone in the room was stunned, most of all, me, because I could see where this was going. "In the movie business, when we produce a big movie and it's a flop ...we take some bad press for a few weeks or a few months, but then it goes away. The next movie comes out and everyone forgets. But THIS ...this is different. If this doesn't work ...if this is not a success ...it's there, forever..." I remember thinking to myself "oh my god, this guy does NOT get it..." And he said "I don't want to be the guy that approved this and then it's a flop and sitting out there in Vegas forever."

And with that, Mr. Jaffe in a single moment, destroyed about five months of work by a host of people, and killed one of the greatest ideas of all time.

Stanley waltzed out of the room and I think everyone was stunned. No one could believe it. But our dream pretty much ended there. Sherry Lansing was stunned and apologized to the room and followed her boss out. The Paramount licensing team was embarrassed to say the least, and of course, they were also realizing they had just lost out on millions of dollars in future licensing revenues too. The Mayor and the redevelopment committee were just depressed I think. But they thanked me for all the efforts I put into it, and for making the meetings with Paramount possible, and then they headed back to Las Vegas.

So, with THE STAR TREK ENTEPRISE now officially off the table, the city awarded the competition to the #2 concept...the big rooftop "video screen" that became THE FREMONT EXPERIENCE ...which, while lacking the imagination, majesty, power and iconic nature of the STARSHIP ENTERPRISE, still managed to turn the downtown area around for about five years. So given that, imagine what the ENTERPRISE would have done.

Fan or not, visitors to Las Vegas would have HAD to go see this and get their photo taken there.

The fact is, had Mr. Jaffe approved the project, it would have been the most memorable project in his life, it would have been a financial boon to Paramount, still paying the Studio to this day. And it would have been a great part of his legacy, the Paramount legacy, and the Star Trek legacy.

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This is a remarkable story. Stanley Jaffe was perfectly willing to take short term risks in tiny packages, but when it came to long term risks, he froze.

However, Stanley Jaffe is not alone. We see this every single day.

Look at newspapers and magazines. Every single trend points to the fact the publishing in the future is digital in a connected world, so why are so few publishers embracing it? Most of the digital 'experiments' that we see today are not actually taking a risk. They are mostly short term experiments that only accounts for a small part of the media companies budgets or time. It's projects that can fail without any lasting effects.

Or look at brands. Every single trend points to the fact that brands should spend the majority of their marketing budgets on digital and social channels. But most brands don't even come close.

Why? Because digital is a long term risk.

A print marketing campaign is something you can do fairly quickly, and if it fails, well, you just try again. But digital works by building a relationship and using the momentum to grow. A social strategy is not to do a fancy campaign that might or might not fail. It's a multiyear investment into creating a relationship that people care about.

Most brands are making exactly the same mistake as Stanley Jaffe. The fear of doing something that might have a negative impact in the long term, forces them to focus on short term advertising campaigns.

Remember Kodak, Blockbuster, or Borders? This was why they failed. They kept focusing on taking short term risks and neglected to embrace the long term changes. As the world slowly changed, their existing business model lost its momentum, and finally collapsed.

This is happening in almost every industry:

• Gaming industry: Perfectly willing to risk creating games, but don't dare sell the games directly on the XBOX. Instead, games are 6 to 12 months delayed to protect the old retail channels.
• Movie and TV industry: Perfectly willing to risk making new movies and TV shows, but are unwilling to risk streaming it directly to people.
• Book industry: Perfectly willing to risk publishing new books, but completely unwilling to embrace the connected book world.
• Newspaper industry. Perfectly willing to risk creating new sections or small changes to the format, but don't dare embrace the new world of personal news aggregation.
• Fashion industry: Perfectly willing to risk embracing new short term fashion trends, but most do not even have a web shop yet.
• Auto industry: For years they where perfectly willing to risk making new cars, but it took a financial crisis to get them to focus on hybrid or electric cars.
• Radio industry: Perfectly willing to risk making new shows, but not risk reaching people directly via podcast.
• Mobile phone industry: Willing to risk making new handsets, but they never risked changing the purpose of the phone itself (until Apple came along) ...It same with the PC industry vs the tablet.

Short term risk is not actually a risk. It is just a continuation of the status quo. A real risk is one that moves you into the future. One that have a lasting impression, even if it is a failure.

This is different. If this doesn't work ...if this is not a success ...it's there, forever...

Yes it is. That is why it is called a risk!

Free Yourself From the Office - (by @baekdal)

People who are close to me know that I am a bit anti-office. The entire idea of forcing anyone into the same building, when the products that we make is being produced in China, makes no sense.

The office was invented back when the only form of communication was face to face. Back then it made sense to force everyone together otherwise you couldn't coordinate what needed to be done.

But today, we have absolutely no problem coordinating that our products is being produced on the other side of the planet. We live in the connected world. Why is it that we can work efficiently with people from far away, but apparently cannot with people in the same country?

The office solved the huge problem of communicating, but it also brought with it a number of disadvantages.

First we have the commute. Back when I used to work in an office, I would have to spend an hour every day being stuck in traffic. That is a full hour during which I could have done some serious work. For instance, this article took 20 minutes to write.

Then we have the idea that everyone should be 'in the zone' at the same time, despite the fact that many studies have proven it to be impossible. What you really get is suboptimal efficiency.

We also have the huge amount of interruptions throughout the day. Not just by co-workers, but by the sheer noise level oozing out from every workplace.

But the biggest problem with the office is the shallowness. People are never given enough time to think. Someone will walk up to you, ask a question and then stand there waiting for an answer. The result is that all the answers you give are whatever that comes to your mind at that moment. And the result is mediocre at best.

Companies then try to solve this by having meetings and brainstorming sessions. The whole concept of those is to focus on quantity over quality. You cannot think you cannot reflect you cannot respond. You just have to say whatever comes to you as fast as possible.

Think of something now, more ideas the better, don't stop, don't think, just give me an idea!! Right! Now another one ...and another ...good, keep it coming!! ...MORE IDEAS!!

The result is a whiteboard filled with an impressive amount of ideas. But the basic quality of these are often pretty low.

The whole concept was envisioned by Alex Osborn in 1948, but several studies have proven that he was wrong. That kind of working environment doesn't produce better results.

I too used to be an Osborn fanatic. I believed in the office and the idea that people worked better if they where all in the same room - even better, if it was in an open office environment.

In 2005, when I started working virtually, I learned that the office is pretty much the worst place for serious work. I hired this guy, Andy, in New Zealand, to help me with a number of projects. Not only was he on the other side of the planet, but he was also in a completely different time zone. Traditional office thinking dictated that this could not work.

But what extraordinary difference it made. The difference in time zones actually allowed us to work twice as fast. I would be working when he was asleep, and he would work when I was asleep.

Sure there where times when one of us got stuck, and we would lose a day, but those times were nothing compared to what we gained.

The biggest difference, however, was the dramatic increase in quality. Whenever he asked a question, I would have an entire day to think about it. That meant that I didn't just answer whatever that was at the top of my head at that specific moment, but each answer had time to incubate in the back of my head.

The result was dramatic. When I worked with local people and agencies, I spent an enormous amount of time going over the same thing again and again. But when I worked with Andy, everything just flowed.

This not only meant we could do the same amount of work faster (usually three times faster), it also meant we could do it at a substantially lower budget (less than half).

In 2007, I started to combine working virtually with working from home, and I would only show up at the office when I had a meeting with someone. Again, what I found was remarkable. When you move away from the office, the lack of constant distractions make you about a billion times more productive. The first couple of months, I often found myself in the odd situation that I had completed all the work that I had planed for that week, but it was still only Tuesday.

Not to mention that I had an extra hour of free time because I no longer had to commute. Working virtually was three times faster, at half the cost.

Working in an office does have it's advantages too. It's social. It brings your team closer together, and you can hear all the gossip. From a social aspect, those are all good things.

But from a work perspective and in actually getting things done fast, efficient, and at the highest quality, the office sucks.

Worse is when you combine office life with local media agencies. Try calculating the return of investment on this:

Let's say you have an one hour meeting in another city. You first have to drive for one hour to get there. Then you spend the first 10 minutes saying hello and introducing everyone, then another 25 minutes looking at slideshows, and then 15 minutes of serious talk, followed by 10 minutes of chit-chat. Then you have to spend another hour driving back. And because the meeting was at 11 AM, you didn't get to do anything serious form 9 to 10 AM ...and you are definitely not going to do much from 2 to 5 PM other than to check email.

That's an entire day wasted so that you could have 15 minutes of serious discussion. I could have done all that in 20 minutes virtually.

The difference in productivity between office live and virtual life is simply immense. Not to mention that working virtually also reduces people's stress levels and makes it easier for them to organize their lives. People don't have to work from 9 to 5, they can work when it suits them the most.

There are, of course, also disadvantages to working virtually:

• There is much less social interaction. Extroverts in particular will have a very hard time coping with the solitude.
• You have to be a self-starter. Working virtually doesn't work for those who just do what they are told. When they run out of things to do they just sit there and do nothing.
• You have to manage your projects asynchronously. Office live is synchronous. This requires a completely different project flow (and this is the main reason why many managers have a hard time managing virtual projects).
• You have to be motivated and believe in the company you work for. If you don't believe, slacking off is much easier when you are sitting at home. But if you are motivated, you will keep working, even when things don't work.
• You have to be cloud-based. Trying to work virtually with traditional IT systems is a nightmare.
• You need to have a shared platform for collaborating. Working virtually doesn't work if nobody knows what you are doing, or if collaborating involves many complicated steps (think Dropbox + some kind of web platform for managing projects, tasks, ideas etc).
• You need to have mobile tools and mobile internet etc.

Many work virtually by disconnecting from the people they work with. That is not what this is about at all. You need to be connected to people around you.

Another important factor is the work environment. One mistake that many make is that they work virtually from their kitchen table or, worse, in a cramped corner under the staircase.

That is no way to work. If you want to work efficiently, your virtual office has to be as good as your office at work. My home office, for instance, is far better than the workplace I had when I worked in the office. It has good lighting, it's spacious, and it invites work.

Note: Old picture from back before I turned into a Mac/Apple fanatic )

Finally, you need to set boundaries for disruptions. Just because you work virtually, doesn't mean your friends can come by and hang out with you all day, or that your work can be squeezed in between washing clothes and going shopping.

Working virtually doesn't have to be from 9 to 5, but you have to know when you are in work mode and when you are not. For instance, I'm usually in work-mode from 11 AM to 4 PM and then again from 8 PM to 11 PM.

Of course, working virtually does give you a huge amount of flexibility. If you are not 'in the zone' do something else. It's not very efficient to try to work when you body tells you that it can't. It's more efficient to wait and give your body the space it needs.

And working virtually also means that you can bring your work with you into whatever environment that motivates you the most. For instance, I wrote this article on my iPad, sitting in my car. And this is just one of my new eight writing spots. I'm still connected using high-speed mobile internet, but the different environment is a great way to make new ideas flow.

Places like these make me far more productive than anything I have ever experienced in my 15 years in an office.

In the future, we will see more and more virtual companies, even those run by people living in the same city. Instead of working from an office, each employee will work virtually ...but, every now and then, you would meet to socialize at the local coffee bar.

You will likely find that those companies get far more done than those who insist that everyone has to sit in the same room every day.

RESET: The Future of Books in 2015 - (by @baekdal)

In this last part of my 'Reset' series, we are going to look at the future of books. What should you do if you have to start from scratch in 2015? What will books be like? What is the market like?

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