Facebook

What is common to Facebook, the telephone and the QWERTY keyboard

facebook-logoVivek Kaul 

Are you a Facebook addict, dear reader? I clearly am, given that I spend all my waking hours logged on to the website. On days, I am not near my computer, I keep regularly checking for updates on my mobile phone.
So what is it that makes Facebook work? My ‘back of the envelope’ theory is that the website feeds on our internal voyeurism, meaning, you can see the honeymoon pictures of a couple, who did not invite you to their wedding.
But that’s making things a way too simplistic. Or as Albert Einstein once said “It can scarcely be denied that the supreme goal of all theory is to make the irreducible basic elements as simple and as few as possible without having to surrender the adequate representation of a single datum of experience.” This Einstein quote has been suitably paraphrased as “everything should be made as simple as possible, but no simpler.”
Given this, my “back of the envelope theory” needs to be worked on a little more. So what is it that makes Facebook work? Economists have an answer and they call it “network externality”, which are basically markets “where demand for a product creates more demand for the product”. As Paul Oyer writes in his fantastic new book Everything I Needed to Know About Economics I Learned from Online Dating “A product has a network externality if one added user makes the product valuable to other users…The rise of the internet has made network externalities more apparent and more important in many ways…Perhaps the best example of the idea is Facebook. Essentially, the only reason anyone uses Facebook is because other people use Facebook. Each person who signs up for Facebook makes Facebook a little more valuable for everybody else. That is the entire secret of Facebook’s success—it has a lot of subscribers.”
This to a large extent explains why Facebook has retained its dominance despite being challenged by Google. In fact, when Google launched Google+ many experts said it was a much better product than Facebook, and hence, they felt that people would gradually move away from Facebook to Google+. But that really hasn’t happened.
As Oyer puts it “Over the last few years, Google has made one attempt after another to develop a viable alternative to Facebook. Google+, its most recent attempt, is widely touted as functionally superior to Facebook. Google+ has signed up many users, but it has not put any real dent in Facebook’s dominance. Nobody is going to switch to Google+ from Facebook unless most of her friends do, too, and it seems very unlikely that whole groups of friends will act in a coordinated fashion to move from one social network to another.”
In fact, the idea that a product’s demand is based on the product’s demand is not a new one. It has been around for a while. Take the case of the telephone. It was first patented by Alexander Graham Bell in 1876. But it took a long time to get popular.
“The demand for Facebook is essentially exactly the same as the demand for telephones. Why do you have a telephone? Because everybody else has one. It was a bit difficult to get people to use telephones at first. But each new user made the demand for phones a bit higher, because a phone became more valuable to everyone else. The same logic applied to fax machines when they were first introduced,” writes Oyer.
Another excellent example of a product that worked along these lines is the Q-W-E-R-T-Y keyboard. This keyboard was developed by two newspaper editors in the United States and sold to E. Remington & Sons company. The Remington company made adjustments to the design and popularised the layout through its typewriters. It needs to be pointed out that the QWERTY keyboard was designed to take into account the practical problems of the day.
“One noteworthy feature of the Remington design is that it avoided putting letters that commonly followed one another (such as t and h) next to each other to prevent the arms from jamming when keys were pressed in succession. Furthermore, the letters in each row are slightly offset from the row above because the arms attached to them had to go up to the paper without hitting one another,” writes Oyer.
But these features were relevant when people used typewriters (having learnt to type on a typewriter, I can vouch for this). They are not relevant anymore, when the world has moved on to computers. In fact, it is widely suggested that DVORAK keyboard layout is much better than the QWERTY layout. This keyboard tries to minimize the distance travelled by fingers and at the same time tries to “make the typist alternate hands on consecutive letters as often as possible.”
But QWERTY keyboards continue to be as popular as they were. As Oyer puts it “Once it became a standard, everyone wanted to use the QWERTY keyboard because that’s just what everyone else was already doing. The QWERTY keyboard story must make Facebook executives very happy.”
Given this, it will not be easy for a product which is similar to Facebook to break its monopoly, even though it may have features that make it a better product overall.
The article originally appeared on FirstBiz.com on February 10, 2014
 (Vivek Kaul is a writer. He tweets @kaul_vivek) 

How internet makes only a 'few' wealthy and destroys jobs

internet
Vivek Kaul
In 1996, Kodak was ranked as the fourth most valuable brand in the world by Interbrand. In January 2012, it filed for Chapter 11 bankruptcy. A major reason for its fall was the inability of the company to go ‘digital’ fast enough.
Ironically it was an engineer at Kodak who invented digital photography. As Mark Johnson writes in Seizing the White Space – Business Model Innovation for Growth and Renewal“In 1975, Kodak engineer, Steve Sasson invented the first camera, which captured low-resolution black-and-white images and transferred them to a TV. Perhaps fatally, he dubbed it “filmless photography” when he demonstrated the device for various leaders at the company.”
Sasson’s new product was shown to the top bosses at Kodak. He was told “that’s cute – but don’t tell anyone about it.” The reason for the reluctance of the top brass to what would become digital photography was very simple. Kodak at that point of time was the world’s largest producer of photo film. And any camera that did not use photo-film was obviously going to be detrimental to the interests of the company.
So ‘Kodak’ missed the digital revolution despite having invented the digital camera. As marketing guru Al Ries wrote in January 2012 column, just after Kodak went bankrupt “In 1986, Kodak announced the development of the world’s first megapixel digital sensor small enough for a handheld camera, one that had 1.4 million pixels. In 1994, Kodak introduced the first digital camera under $1,000. Between 1985 and 1994, Kodak invested some $5 billion into digital research & development. As a result of its massive investments, Kodak holds more than a thousand patents related to digital photography. Kodak recently received, in patent-suit settlements, $550 million from Samsung and more than $400 million from LG Electronics.”
Despite being a pioneer in digital photography, the focus at Kodak was always on trying to sell ‘more’ photo-films. And that finally led to bankruptcy in the end.
The new face of digital photography is Instagram, a company which was bought by Facebook in 2012 for a billion dollars. Computer scientist and philosopher Jaron Lanier makes a very interesting point comparing Kodak and Instagram in his new book Who Owns the Future? 
As he writes “Kodak employed more than 140,000 people and was worth $28 billion. They even invented the digital camera. But today Kodak is bankrupt. And the new face of digital photography has become Instagram. When it was sold to Facebook for a billion dollars in 2012, Instagram employed only thirteen people. Where did all those jobs disappear to? And what happened to all the wealth that those middle-class jobs created?”
So what makes Instagram so valuable, asks Lanier? “Instagram isn’t worth a billion dollars just because those thirteen employees are extraordinary. Instead, its value comes from the millions of users who contribute to their network without being paid for it. Networks need a great number of people to participate in them to generate significant value. But when they do, only a small number of people get paid. That has the net effect of centralizing wealth and limiting overall economic growth.”
And this is true not only for Instagram. Take the case of Google. It might be a great search engine but ultimately it’s the people (and not its employees) who are generating the content that Google helps throw up. What would Facebook be without the ‘time’ that people choose to spend on it? The same stands true for Twitter as well.
It is people like you and me who make these networks so valuable. As Lanier writes “An amazing number of people offer an amazing amount of value over networks. But the lion’s share of wealth now flows to those who aggregate and route those offerings, rather those who provide the ‘raw materials’…We want free online experiences so badly that we are happy to not be paid for information that comes from us now or never. That sensibility also implies that the more dominant information becomes in our economy, the less most of us will be worth.”
This concentration of wealth is one of the negative effects of the digital revolution. “The clamour for online attention only turns into money for a token minority of people, but there is another new, tiny class of people who always benefit. Those who keep the new ledgers, the giant computing devices that model you, spy on you, and predict your actions, turn your life activities into the greatest fortunes in history. Those are concrete fortunes made of money,” writes Lanier.
All that I have discussed till now stands true for music industry as well. It used to be a big industry until things started to go digital. “At one time, a factory stamped out musical discs and trucks delivered them to retail stores where salespeople sold them…There used to be a substantial middle class population supported by the recording industry, but no more. The principal beneficiaries of the digital music business are the operators of network services that mostly give away music in exchange for gathering data to improve those dossiers and software models of each person,” writes Lanier.
If all this wasn’t enough, the Moore’s law is still at work leading to negative consequences. As Lanier points out “The law states that chips get better at an accelerating rate…The technology seems to always get twice as good every two years or so…This means that after forty years of improvements, microprocessors have become millions of times better…As information technology becomes millions of times more powerful, any particular use of it becomes correspondingly cheaper…Moore’s law means that more things can be done practically for free, if only if weren’t for those people who want to be paid. People are the flies in the Moore’s law ointment. When machines get incredibly cheap to run, people seem correspondingly expensive.”
Lanier gives the example of printing presses and newspapers. “It used to be that printing presses were expensive, so paying newspaper reporters seemed like a natural expense to fill the pages. When the news became free, that anyone would want to be paid at all started to seem unreasonable. Moore’s Law can make salaries – and social safety nets – seem like unjustifiable luxuries,” writes Lanier.
The internet essentially destroys jobs, even though it ‘seems’ to make things more efficient.

The article originally appeared on www.firstpost.com on August 10,2013
(Vivek Kaul is a writer. He tweets @kaul_vivek) 
 

‘How we organise our digital inheritance will be a major concern in the future’


With more and more of our lives moving online in the days to come we will have to figure out who to leave that legacy to. “How do we organise our digital inheritance will be a major concern in the future. To whom do you want to transfer all your digital life is a question that will need to be answered,” says Ferdinando Pennarolla, an associate professor at the department of management and technology, Bocconi University in Milan, Italy. He was in India teaching the first batch of students at the Mumbai International School of Business, an initiative of the SDA Bocconi School of Management. In this interview he speaks to Vivek Kaul.
 
I wanted to start by talking a little bit about our digital lives. More and more of your lives are moving online. So how private are our lives?
There are two pitfalls of this story. One is the pitfall of the consumer and the other one is the pitfall of the agencies and the authorities that have to set rules about the privacy for the future. The consumers are not asking themselves to what extent their digital lives are there forever. When you write something on the internet it is written on the stone. It is forever. It is very difficult to erase things on the internet. Once you get Googlised it is very difficult to cancel or erase your news. There many stories of people who want to remove themselves from Facebook and Twitter. But there are many other stories where people cannot erase their contribution to things like community groups and forums. How do we organise our digital inheritance will be a  major concern in the future. To whom do you want to transfer all your digital life is a question that will need to be answered.
Could you discuss this in detail?
Our digital lives are characterised by services to which we have subscribed, say newsletters, social networks, e-commerce websites, free email accounts, blogs, and any other sort of profiling registration we do on the web to access to services and make our online purchases. Since we are not yet in the (eventually) forecoming era of the “digital identity” with an hopeful single sign-on technology that gives the pass to all we need on the web, the issue that remains open today is what happens to all this digital heritage when we will pass away. Who will have access to all of this? Will these accounts just be cancelled because they will remain unutilised? Will the vendors still keep on bombarding our mailboxes with news and advertising? I think there is a need of an integrated service that in the future will take care of all our digital and networked life, and pass it to our loves, according to our will.
What are the pitfalls at the agency level? 
The pitfall of the agencies and the regulatory people who have to work on privacy are the following. I think we have to reformulate drastically what we mean by privacy. Let me quote a story which I was not mistaken happened two years ago and turned into a major scandal. It was found that there was a log file in the Apple iPhone available only when the user was synchronizing the iPhone with iTunes and this file was sent to Apple. It contained all the log information about the GPS presence of the user. And it was a big scandal. People started saying things like Apple is investigating about our lives. Apple knows where I am walking with whom I am talking. Apple knows whether I am travelling not travelling. Is this fair? Is this against private? It was a big debate.
And what happened?
I went onto the internet and I saw many of the blogs talking about it as well. And do you know what was the most common response? Who cares! I am not a criminal. I am not a government representative. Whether I am walking in Mumbai or I am walking elsewhere, who cares that they know. So there are people who have no problem in disseminating their information. The problem is that in many cases we think privacy is being violated but everyone else may not be thinking on similar lines.
That’s a very interesting point you make…
Let me elaborate on this a little more. I don’t wish that this happens to anybody, but do you know what is the very first thing you will do, if you are diagnosed with a cancer? You will go on the internet. Yes. You will go on the internet. You will start grabbing information about your case and similar cases. And do you know what is going to be next step? You will be sharing your story with other people. There are zillions of websites with cancer patients sharing their super private lives with everybody and pharmaceutical companies don’t know what to do with it. So there are some circumstances in life, where the traditional old fashioned notion of privacy is definitely in dire straits. Zuckerberg and his friends, they made an IPO with our privacy. They built a huge company with pictures and facts that I share with my circle of friends.
How are companies using this information that we leave online?
I think there is a big room for business on this. Let me make a case. Yesterday it rained very heavily in Mumbai (the interview was taken on an earlier date). I just talked to the head of the academic activities at my school and it took her four hours to get home and she only reached around midnight. Is that sane? It’s insane. Now routing traffic on the basis that people want to share their local information would be fantastic. It would mean exploiting the possibility of returning services to citizens based on the data they produce and the data they want to share. Google has started this in some cities. But they are still in the test phase. So we will have to wait and see to what extent this will become a popular service. I like to say that it is much less expensive to move bytes instead of moving atoms. Moving atoms should be the ultimate solution.
Any other examples?
Then there is the case for the health care businesses. And I would say that we are at a very early stage. I have been working with the giants of the industry and if you get into the Facebook pages of the pharmaceutical companies or look into the social network strategies of these companies, you will discover that some of these companies are trying to listen what is happening on the web. They are trying to understand how consumers are talking about their products and their therapies. That I think is a start and then eventually these companies will use this kind of data for returning services to the end consumer.
But you are talking from a positive point of view…
Yes. You know it is a of trade off. Let me put a case. Every time something dramatic happens in my country like a kidnapping, shooting, or a major accident, what happens is that police gets into a desperate search of webcams that eventually had the fortunate possibility to shoot the situation. These cameras could be something like private cameras for security purposes at a hotel. Now if you spread out cameras all over the city definitely you are invading the private life of your citizens and that they are being filmed at every single step of their lives in the city. But the returning action is that you can defeat criminals, who are a major problem in any country. Nothing is safe because in the end we are talking about human beings. But I do believe in policies and practices and I do believe in their enforcement.
Do companies like Google benefit because they have an access to a major part of our digital lives?
There is the famous quote from the Google founders “don’t be evil”. They know that they run the risk of being perceived as the evil of the world sitting on an incredible amount of data on processing information about users. I think Google is sitting on a pile of data which is very difficult to process and analyse. In fact, they are very cautious in turning this data into further initiatives. It is very difficult to trace behaviours when you move in different areas of the world,  when you have different IP numbers and when you have different devices. So it is very difficult to then a have an interpreting model of the user behaviour. So once again it’s not easy to trace what you are actually doing. Can I say that, that’s the not the solution that we have to talk about.
Then what should we talk about?
The Google people made the brilliant contribution of re-inventing the way we do searches and making a business about that. Searches will be the most important engine of mankind in the years to come. But because of all the information that will be there, the difficulty will be in catching the information that you are looking for. So we need different engines. I predict the Google story will come to an end or they themselves may re-formulate their engine view and get into different type of searches. People get a little bit dissatisfied when they do traditional searches on the web. They get lots of popular stuff that they are not looking for. When you are under pressure when you have to make a fast decision you don’t want that to happen. You want to have exactly what you are looking for. This will have to change.
What kind of specialised things do you see them getting into?
The answer is semantic search engines which have the ability to interpret what you are looking for. But these are still in their early stages because semantic engines are very expensive to build and they need a lot of self learning. This database of semantic searches is the future that I see. In a recent blog you wrote “customer service operations today are similar to the organisation of the early mills and factories of 100 years ago. There is a long long way to improve in customer service, anywhere in the world. Neither the best admired companies are immune from this.” What made you say that? 
Deploying a service with a face to face encounter in many businesses is no longer rewarding. Think of type of services like insurance or giving support to the customer once the product supplies have been done. They don’t have any reason to keep on opening local offices and having customers visiting those local branches. So more and more customers are logging onto the web or making a phone conversation to get their problems resolved. But there is a problem with the way customer service operations and call centres are organised. These jobs are of the highly repetitive kind where you do and do the same thing over and over again. You are bombarded by mails and phone conversations and then at the end of the day you are exhausted because you are working hard eight hours a day managing hundreds of complaints from customers.
Yes, I guess that’s true….
If you visit these organisations, I am sorry to say, they look like chicken gates, where people are organised in small cubicles. Sometimes the environment is very noisy as well and at the same time the people who work in these call centres are trying to understand what the customers are saying on the phone. I would say that this is insane. This is really like old industrialised assembly lines of 150 years ago. The other kind of organisations have been evolving their orgnisational modes towards much more up to date and more humanised, productive and motivation oriented environments. I am not surprised in many of the customer service operations, also in India, experience high turnover rates. So there is a major challenge for customer service managers to reinvest these organisations in such a way that I enter the customer service operation as a junior manager and I leave at the retirement age, let me provocatively say.
Do you see that happening?
No. It is not happening with the exception of a few cases. In 2003, there was a scientific research in the Academy of Management Journal which is one of the leading publications in my field. The research demonstrated for the first time ever that in customer service operations there is a positive correlation between customer churn rate and employee churn rate. This is very interesting and which means that if you want your customers happy, you have to make sure that your employees are happy. As opposite, if your customers are unhappy it is very likely that one of the reasons is that your employees are unhappy. But are customers happy with customer service operations? I fight on a daily basis to be served on the phone. And the quality of the service is lousy. It is very poor. Sometimes you have to remake the connection or re-explain the things with several agents over and over before getting a problem solved. This is happening in insurance, banking, travel, transportation and even in telecommunications.
Why?
Just to be frank and open, it is very difficult to find the right solutions and the right processes working in the back-office without any face to face interaction with the customer.
Another interesting blog of yours was on the growing number of digital subscribers of the New York Times newspaper. That raises a few questions. Do you see newspapers being a viable business model in the days to come? Or will the biggest newspapers of the world largely move online?
We are at a turning point and the turning point is the following. Definitely the news business is becoming more and more free. Everybody has news. The earthquake followed by the tsunami in Japan was communicated across the planet, faster than anything else. And it started with basically a few people shouting about it on Twitter. All this is fantastic news for mankind. We want to be informed and we spread out the news all over the planet. But the point is that   we have to make a balance between the crowd-sourcing of news and the authoritative production of news.
Could you elaborate on that?
I would not want to stop the crowd-sourcing of news from people who become journalists simply because they are eye witnessing something that is very important. At the same time we need editorials. We need people who can interpret news. I value this a lot. I am still on old fashioned customer. I still purchase newspapers. Of course I purchase the digital version. But I still pay for the news that I get. But at the same time I am a very well informed citizen. I am always connected to the internet. I have my news websites open. And I grab the news instantly as soon as it comes. But still a day after I love to get into editorials to get an understanding of what is happening. I think the publishing industry has to find a solution. Is a solution readily available now? No.  They are still in between.
 
The interview originally appeared in the Daily News and Analysis on October 1, 2012. http://www.dnaindia.com/money/interview_how-we-organise-our-digital-inheritance-will-be-a-major-concern-in-future_1747236
(Interviewer Kaul is a writer and he can be reached at [email protected])
 

"In future, VCs will help launch new brands. Tata, Reliance had better watch out"


Companies are in a perpetual race to expand sales. And the easiest way to do that is to expand their well known successful brands into other categories. As marketing consultant and author of many bestsellers Al Ries puts it “If a brand is well known and respected, why can’t it be line extended into another category. That’s common sense. That’s why Xerox, a brand that dominated the copier market, introduced Xerox mainframe computers. A decision that cost the company billions of dollars. That’s why IBM, a brand that dominated the mainframe computer market, introduced IBM personal computers. In 23 years of marketing IBM personal computers, the company lost $15 billion and finally threw in the towel and sold the operation to Lenovo, a Chinese company.” Ries is the author of such marketing classics (with Jack Trout) as The 22 Immutable Laws of Marketing and Positioning: The Battle for Your Mind. In this interview to Vivek Kaul he speaks on various aspects of branding and marketing.
You have often said in the past that there is a a big difference between common sense and marketing sense. Could you discuss that in some detail with examples?
Common sense is another way of saying “logical.” Almost every rule of marketing is not logical, it’s illogical, which I defined as “marketing sense.” It takes years of study and personal experience to develop good marketing sense. Yet too many management people dismiss the ideas of their marketing managers because “marketing is nothing but common sense and who has better common sense than the chief executive?” Line extension is a typical example. If a brand is well known and respected, why can’t it be line extended into another category. That’s common sense. That’s why Xerox, a brand that dominated the copier market, introduced Xerox mainframe computers. A decision that cost the company billions of dollars. That’s why IBM, a brand that dominated the mainframe computer market, introduced IBM personal computers. In 23 years of marketing IBM personal computers, the company lost $15 billion and finally threw in the towel and sold the operation to Lenovo, a Chinese company. That’s why Kodak, a brand that dominated the film-photography market, introduced Kodak digital cameras. In spite of the fact that Kodak had invented the digital camera, the company was never successful in marketing the cameras under the Kodak name. And recently Kodak went bankrupt.
With all the experience you have had consulting companies all these years which area of marketing do you feel that marketers have the most trouble with?
We have had the most trouble working with large companies marketing big brands. And the issue is always line extension. Companies want to expand their sales so they figure the easiest way to do that is by expanding their brands into new categories. In other words, line extension. We have worked with Burger King, Intel, Xerox, IBM, Motorola, Procter & Gamble and dozens of other companies that invariably wanted to expand their brands whereas we almost always recommend the opposite strategy. Narrow the focus so your brand can stand for something. The second issue is timing. We have always recommended that companies try to be the first brand in a new category. But that is a difficult sell to top management. Their first question is usually, What is the size of the market? Of course, a new category is a market with zero revenues. And many, many management people never want to launch a product into any category that doesn’t already have a sizable market. We worked for Digital Equipment Corporation, a leader in the minicomputer market. We tried to get them to be the first to launch a personal computer for the business market. (IBM eventually was the first to do so, but without a new brand name which led to their failure.) In spite of days of meetings and presentations, the CEO of Digital Equipment refused to launch such a product. “I don’t want to be first,” he said, “I want IBM to be first and then I’ll beat their specs.” After IBM launched its personal computer, Digital Equipment followed, but never achieved more than a few percent market share. Eventually the company more or less fell apart and was bought by Compaq at a discount price.
How can a No. 2 brand compete successfully with a leader?.
What a No.2 brand should do is easy to explain, but difficult to execute. A No. 2 brand should be the opposite of the market leader. Why is this difficult to do? Because it’s illogical. Everyone assumes the No.1 brand must be doing the right thing because it’s the market leader. Therefore, we should do exactly the same thing, but better. That seldom works. Take Red Bull, the first energy drink and the global market leader. One reason for Red Bull’s success was the fact that it came in a small, 8.3-oz. can that symbolizes “energy,” like a stick of dynamite. So almost every competitive brand was introduced in 8.3-oz. cans and marketed as “better” than Red Bull. Except Monster, a brand introduced in 16-oz. cans in the American market. Today, Monster is a strong No.2 brand with a 35 percent market share compared to Red Bull’s 43 percent share. Also in the American market, BlackBerry was the leading smartphone until Apple introduced the iPhone. BlackBerry had a keyboard. Apple eliminated the keyboard and used a “touchscreen” instead. Mercedes-Benz was the leading luxury-vehicle brand until BMW came into the market. Mercedes vehicles were big and comfortable, so BMW became smaller and more nimble, as dramatized in the brand’s long-running advertising theme, “The ultimate driving machine.” As a matter of fact, BMW introduced the campaign with a two-page advertisement headlined: “The ultimate sitting machine vs. the ultimate driving machine.”
Do long running marketing campaigns help? How many companies have the patience to run a marketing program for two or three or four decades?
Next to line extension, that’s the biggest problem in marketing today. Companies don’t run marketing programs nearly long enough. The best example of a long-term successful campaign is the one for BMW. “The ultimate driving machine” strategy was launched in 1975 and the company still uses the same slogan today. That’s 37 straight years. Most marketing programs don’t last longer than three or four years. That’s way too short a time to make a lasting impression in consumers’ minds. I can’t recall any major marketing program, except for BMW, that has lasted more than a decade or so.
In a recent column you wrote that logic is the enemy of a successful brand name. What did you mean by that?
By “logic” I mean what you would use as a brand name if you did not study marketing and had no experience as a marketing person. In other words, common knowledge versus specialized knowledge. It’s like the Sun and the Earth. Common knowledge would suggest that the Sun revolves around the Earth and not the reverse. Look out your window and it’s obvious that the Sun is moving and the Earth is standing still. But specialized knowledge knows that isn’t true.
What is the connection with brand names?
As far as brand names are concerned, logic or common knowledge suggests that a generic name like Books.com would be a better choice than Amazon.com. If the prospect wants to buy a book, then logically the prospect would go to a website like Book.com or Books.com.
But a marketing-trained person knows that isn’t true. It’s not how a mind words. When a person hears the word “Book,” he or she doesn’t think it’s a website at all. It’s the generic name for a category of things. On the other hand, thanks to its marketing program, “Amazon” has become a specific name for a website devoted to selling books. So when a person thinks, “I want to buy a book on the Internet, he or she doesn’t think “Books.com,” he or she thinks “Amazon.com.” In almost every category, a specific “brand” name performs better than a generic “category” name. Google.com is a better name than Search.com. YouTube.com is a better name than Video.com. There is a caveat, however. In the absence of a marketing program that establishes a brand name in consumers’ minds, a generic name could do well.
Why do you say that as a general rule, any name that specifically defines a category is bound to be a loser?
Consider how a mind works. If I say “coffee,” you literally hear that word in your mind spelled with a lower-case “c.” It’s a common noun, or a generic word that stands for an entire category of things. The same reasoning hold true for a more specific name like “High-end coffee shop.” If I say “Starbucks,” on the other hand, you literally hear that word in your mind spelled with a capital “S.” It’s a proper noun, or a brand name that stands for a specific chain of high-end coffee shops. Oddly enough, you can use common English nouns in another country as brand names? Why is this so? Because consumers don’t know the meaning of these common words. So these words become proper nouns instead and usable as brand names. For example, a stroll down a street in Copenhagen turned up these store names: Biggie Best, Exit, Expert, Face, Flash, Joy, Limbo, Nice Girl, Redgreen, Sand and Steps. Nice brand names in Copenhagen perhaps. But they wouldn’t work in America.
What do you mean when you say that “the internet is exceptionally good at promoting web, not physical, brands.” Could you explain through examples?
First of all, consider the fact that the Internet has created a host of new, very-valuable Internet brands including Amazon, Google, Facebook, YouTube, Groupon, Pinterest, LinkedIn and dozens of others. How many new physical brand names were created on the Internet? I can’t think of any. The Internet is the newest, latest medium. It attracts people who are interested in what’s new and different on the Internet. So there is intense interest in any new website that promises a revolutionary way to handle some of your affairs. But there’s not the same level of interest in new physical brands. Like a new toothpaste, or a new camera, or a new breakfast cereal. That doesn’t mean that new physical brands can’t take advantage of the PR potential represented by the Internet. They certainly can, but it’s going to be more difficult for a physical brand to get a lot of attention on the Internet than an Internet brand.
You recently wrote that “If you don’t have the right strategy, good tactics won’t help you very much. And social, like all media, is a tactic. What concerns me is that too many marketers have elevated tactics — especially those of social media — to the level of strategy.” Could you elaborate on this statement?
Our leading marketing publication is called “Advertising Age.” I have suggested facetiously that the publication should be called “Social Media Age,” because a high percentage of the stories the publication writes about involve social media and marketing on the Internet. Strategy is seldom mentioned. One reason for the intense interest in the Internet is because many aspects are easily measured. A video on YouTube, for example, will be measured by: (1) The number of “Views.” (2) The number of “Likes.” (3) The number of “Dislikes.” And (4) The number and content of “Comments.” That’s a range of responses no other medium can deliver. No wonder marketing people devote endless hours to evaluating the success of Internet programs. But suppose a marketing program is not successful. Do you blame the strategy or the tactics? Today, it’s too easy to blame the tactics. My feeling, however, is that most of the time strategy is at fault.
Are there any ideas on branding which you have espoused in the past which you have now junked?
Yes, we used to think that brand names ought to communicate something tangible about the brand. Duracell is a good example. It suggests that the appliance battery is a “long-lasting” brand. But today, there are too many competitors in any given market. A tangible name like Duracell is likely to be surrounded by many other brands with similar names, confusing the consumer. A meaningless name is often a better choice. It allows you to develop your own unique meaning for the brand. Google is a good example. Initially it meant nothing, but today it means “search.”
What is your opinion on big brand names. India has a lot of them like Tata and Reliance. And they attach these names to every business or product they launch? How do you view that?
That’s line extension and it might work today in India, but would never work in America. In America, there are too many competitors in every category with distinctive brand names. A line-extended name like Tata and Reliance would be at a serious disadvantage here. Why does it work in India? I’m not an expert, but I believe that India suffers from a shortage of venture capital as compared to the United States. It’s hard for an entrepreneur to launch competitive brands to Tata and Reliance because it’s difficult to raise enough money for their introduction. But I believe that will change in future so both Tata and Reliance should be concerned about the future of their brands.
(Interviewer Kaul is a writer and can be reached at [email protected])

'The best thing that can happen to Google is that all its new products fail early'


Michael Brandtner is one of the leading branding and focusing consultants in Europe. and Associate of Ries & Ries. Beside his consulting work he is a frequent speaker on the topics of branding and positioning. “All my presentations start with “Brandtner on Branding”. But “focusing” is still the most important job to do in branding. A brand without a focus has no power at all in the long term. Take Sony! What does Sony stand for? Fifteen years ago Sony was a brand superstar. Today it is a burned out brand,” he points out. In this interview he speaks to Vivek Kaul.
You are a focusing consultant. What does a focusing consultant do?
I help companies to find the right focus for their brands. Most brands today are unfocused. That means that they try to stand for many different attributes at the same time. In a typical brand statement you will find phrases like this: Our brand stands for high quality, great service and innovation. Maybe this makes sense in a brand or positioning statement. But it sure makes no sense in the mind of the customer. Today, if you want to be successful, you need a powerful focus like “driving” for BMW, “breathes” for Geox or “search” for Google. The most powerful brands today are built around a single idea or even better a single word. That is the focus of a brand. And in my consulting work I help companies to find this one word.
What does it take for a company to be focused?
It takes strategic long-term thinking. You really must decide what your brand should stand for. Here in Europe Ryanair is focused on “low fare” airline. Today Ryanair is the most successful airline in Europe. Most other airlines are unfocused. They try to appeal to everybody. Of course most other airlines are in trouble today. Or take the Automobile industry. The brands in the so-called mushy middle are in trouble. The real successful brands are at the high end like Porsche, BMW. Mercedes-Benz, Audi or Lexus or at the low end like Hyundai or Kia. The brands in the mushy middle are unfocused. The brands at the high end or at the low end are focused. So I predict that Hyundai will become the largest Automobile brand in the world.
How does it help if a company is focused?
For most managers it seems not logical to focus. They still believe that the more you have to sell the more you will sell. It sounds so logical. But it isn’t. Marketing is not a battle of products. It is a battle of ideas. So if you want to win the marketing war, you have to focus on the right idea. Here is an example from Germany: In 1988 Dr. Best was just another toothbrush with a market share of about five percent. Then the brand becomes the first “flexible” toothbrush. This idea is the focus of the brand. They only make flexible toothbrushes. The advertising is focused on the flexible idea. They developed a powerful key visual or better called visual hammer with a tomato to dramatize the benefits of a flexible toothbrush. Dr. Best is flexible, flexible and flexible. Today the market share is over 40 percent. This is the power of a clear defined focus. A focus is more than an idea, it also a long term direction for the brand. It is the single idea that helps a brand to dominate a category.
Any other examples?
 Take Opel. Opel is a European car manufacturer that makes a lot of different car models. But Opel has no focus. Why should anyone buy an Opel? I don’t know. Most people don’t know. In the mind of the prospect Opel is just another manufacturer of different car models.
What does it take a company to be all over the place?
Not much! A brand becomes successful with a single idea even a single product like Red Bull as the first energy drink. Then the management starts to add a “sugarfree” Red Bull and even a Red Bull Simply Cola. In most companies this is a natural way to grow a brand. And it is the perfect way to lose focus. This does not happen overnight because it is not easy to change the mind of the prospects. And that is the big problem with the issue of brand- and line-extensions. You can expand a brand over a long period of time and you are still clearly positioned. Then one morning you wake up and you have to realize that your brand does not stand for anything anymore. It takes time to build a brand and it takes time to destroy a brand. Take Sony! What does Sony stand for? Fifteen years ago Sony was a brand superstar. Today it is a burned out brand.
How does it hurt if a company is not focused?
If a brand has no focus, it will end up standing for nothing. That is the problem of Sony today. And maybe it will be the problem of Samsung tomorrow. Samsung is also unfocused. But today Samsung has the Galaxy. The success of the Galaxy is the main reason why most people think that Samsung is a hot company and brand. But Samsung as a brand does not stand for anything specific. Do you know what Samsung stands for? I do not. Fifteen years ago many people thought that Sony was a hot brand because of the success of products like HandyCam, CamCorder and Trinitron. These products faded away and Sony was left as an unfocused brand that stands for nothing specific. Now Sony is in deep trouble. It is like in the political world: If a political candidate tries to appeal to everybody, he will appeal to nobody. Take Barack Obama in 2008! He really did a brilliant move by focusing his entire campaign on one word, on “change”. “Change we can believe in” became his battle cry. That is the power of a focus.
Since everybody is talking about Facebook these days, how focused is a company like Facebook?
Today Facebook is a focused brand and company. Facebook stands for “social network”. It is the leading social network in the mind.
What about Google?
Google as a company is in the process of becoming unfocused. Google as a brand is still focused, because it still stands for “search” in the mind of the customers. It is still the ultimate search engine. But if Google is successful in expanding the company, it will destroy the focus of the brand. The best thing that can happen to Google is that all the new products under the Google brand will fail early.
How do you view the potential of Facebook when it comes to brands advertising themselves?
Facebook is not an advertising medium. It is much more an information medium. To but it even better: It is an interactive information medium. On Facebook people are interested in information, in conversation, in gossip, in buzz. But they are not really interested in advertising. On Facebook marketers have to think more like editors than like classical advertising people.
How does a marketer market in the world of Facebook, Twitter, blogs, and what not? How do you see social media changing marketing?
Social media today is totally overhyped. For many people it is a medium that will change the world of marketing as we know it. Here is my point of view: Social media is an important medium, but it is still only a medium. How important is television as a marketing channel for a company or a brand? It depends on the company, on the brand, on its strategy, on its messages and so on. How important are Facebook or Twitter or blogs as marketing channels for a company or a brand? It depends on the company, on the brand, on its strategy, on its messages and so on. For some companies and brands social media will become very important, for other companies and brands social media will only be another information medium like the web-site. For a car brand like BMW or Audi Facebook may be a great medium, because both brands have a lot of fans and a lot of relevant news for these fans. For a tissue brand Facebook is more like an additional web-site to give some basic information about the brand. Every company has to find out for itself how important Facebook, Twitter or blogs are in the media mix.
What’s the biggest branding mistake that a company can make?
(1) Believing that brand- or line-extension is the ultimate strategy to grow a brand.
(2) Believing that the better product will win
(3) Believing that it is easy to change the perception of customers with advertising.
Especially companies in trouble are doing these three things at the same time. Typical example here in Europe is Opel! Opel is in trouble. The typical reaction: We have to launch new models under our brand name to win market share. We have to build better products than the competition, because customers prefer better products. We have to change our logo and we have to launch a new advertising campaign to change the perception of our brand. Will it work? Of course not. Opel needs a new focus. Take Apple! About 15 years ago Apple was in trouble. What did Steve Jobs? He launched the iPod in 2001. He focused his efforts on a new brand to rebuild Apple. The success of the iPod did more for Apple than all other marketing efforts combined. It was also the base for the iPhone and the iPad. Steve Jobs knew about the power of a clear defined focus. He built three leading focused brands in only one decade, the iPod, the iPhone and the iPad. By doing this he made Apple the most admired company and brand in the world.
What are the areas of marketing according to you which marketers have the most trouble with? How can they address it effectively?
Still many management and also marketing people confuse reality with perception. That`s why they believe that the better product will win. Not true. The better brand will win. New Coke was the better product. Coke Classic is the better brand. Who wins? Coke Classic. Marketing is not a battle of products. Marketing is a battle of perceptions.
Could you elaborate on this point a little more?
Most companies are still building or investing in better products. But they should invest in better brands. Take Nokia! Nokia is the dominant brand for mobile phones. But Nokia is a weak brand in smart phones. Nokia stands for mobile phone, not for smart phone in the mind of the customer. So what is Nokia doing? They try to build better smart phones like the Nokia Lumia. Maybe the Lumia is a great smart phone in the factory. But in the perceptions of the customer it is just another smart phone on the market. Nokia should stop building better smart phones and start building a better smart phone brand. To achieve this they have to do two steps: Step one: Nokia has to create a new category of smart phones with a new powerful app. Step 2: Nokia has to give this smart phone a completely new brand name.
Why are big companies unable to launch successful new brands? They usually end up buying other brands. Like Google bought Orkut or Facebook bought Instagram recently.
The reason behind this is the so called corporate ego. If a company has a powerful brand name, it will tend to use this “powerful” name for all products. That is good thinking inside the company, but it is bad thinking outside the company. For the Kodak management is was logical to use the Kodak name also for the digital products. But this does not make any sense outside the company. Why should anyone buy a digital camera from a photo film company or brand? Kodak is not perceived as an expert for digital cameras. That`s the point. So it is not a bad strategy for big companies to buy new brands. If Google had launched a web-site for video search on its own, they would have probably called it Google Video. Instead they bought YouTube. Google now owns two strong brands and also market leaders in the search engine business. Google is the ultimate search engine. YouTube is the ultimate “video” search engine. Additionally Google has also Android. That is a great multi brand strategy. Google+ on the other hand is only a me-too social network. That’s a bad brand strategy.
So what does that mean?
That means: Companies have to overcome their corporate ego to launch second brands. But there is one very important point. It is not enough to launch a second brand first of all you need a new category. Take Microsoft in the search engine business! It is regardless whether the call the search engine MSN Search or Bing, because the strategy “launching a me-too search engine” is wrong. That means: If you launch a second brand, you first will need a new category. Without a new category you should not launch a second brand at all.
(Interviewer Kaul is a writer and can be reached at [email protected])

(The interview was originally published in the Daily News and Analysis(DNA) on June 11,2012. http://www.dnaindia.com/money/interview_the-best-thing-that-can-happen-to-google-is-all-its-new-products-fail-early_1700670)