The Near Memo, Episode 4

Facebook Hides Behind SMBs, Hey's New Newsletter Product, and Wal-mart Innovates with Video

Greg: Okay, welcome to the nearer memo. Episode 4, I believe. This is our weekly conversation with me, Greg Sterling, Mike Blumenthal on David Mihm about search, social, commerce, and everything that's going on in the world of the local internet. And so welcome to you guys again. Thanks.

David: Mike, you missed the memo on the black hoodie uniform too.

Mike: I did. I did. I did. We're going to have to get, as you said, we're going to get, have to get some swag that includes black hoodies, right? Although it's like hoodies are not quite my style though. I'm adaptable. I might be able to find it.

Greg: See, if you were living on the West Coast now, rather than cross country skiing, you'd be surfing. So it would be appropriate --

Mike: – and also I would have a ponytail.

Greg: I'm heading there. I'm heading there, I'm telling you. All right. So we're, as always we picked three stories of the week that we found interesting or compelling for one reason or another, and we dive into them and I'll lead off with the Facebook personalized ads news. They released a campaign and a commercial and the campaign celebrating. I think the, I forget what the formal title

Mike: “Good Ideas Deserve to be Found”.

Greg: Yes. Good Ideas Deserve to be Found. Thank you.

And they were promoting the value of personalized ads to small businesses. Calling them and their Facebook tools in general, a lifeline for small business during the pandemic.

And my initial reaction, I was on the call that they did before they formally released it, and my initial reaction was one of just intense cynicism, right?

This is Facebook trying a PR ploy to combat what Apple is doing and hiding behind small business and trying to present themselves as the champion of small business.

And it's just very hard not to receive this news without incredible skepticism, but I feel like the people working on this, on these projects, the small business employees at Facebook are really sincere in their desire to help small business and do take their, what I would call ethical obligations, to these people very seriously.

So there's a kind of weird dichotomy or contradiction between the corporate kind of messaging and what the motives of the corporate corporation are. And then the individuals who are actually carrying this stuff out --

Mike: There's a disconnect with their PR on this as well. This article at their blog basically creates this false moral dichotomy between privacy of everybody in the world against consumers being able to find yoga places with goats. It's such a reprehensible piece of propaganda that it makes me gag. I think that marketers have managed to give themselves a bad name. They look good compared to whoever wrote this piece of content.

This content, whoever wrote it is falls right into that cynical category. This just doesn't, it rings so hollow and creates such a false narrative and I have trouble even reading it without  gagging.

David: I would be curious to know the percentage of Facebook small business advertisers who are using personalization at all in their ads.

My experience working with SMBs – it's limited the last four or five years as I've had other projects – helping them with Facebook ads, there may be people that know how to boost a post.

But I don't see many SMBs running a really narrowly targeted, personalized ad campaign on Facebook.

I think the reality is it's professional marketers, largely at enterprise corporations who are taking advantage of the micro targeting that Facebook enables.

Greg: I think that's a very valid point. I would say that they define personalized ads as any kind of targeting right. To any subgroup within Facebook.

So not necessarily the CA Cambridge analytical style micro-targeting. But I think it's a point well taken

Mike, you were going to say something well...

Mike: Given that Facebook has such a large first party ecosystem, they still will be able to do a very high level of personalization within their ecosystem.

They just won't be able to scrape the rest of the web to do is that correct?

Greg: Yeah, this is really about the audience network and within the sort of first party universe on its apps and insight there, they're not going to be impacted by this. In a way, maybe these are crocodile tears a little bit.

They came out and said 50% of our audience network revenue is going to be impacted by this, but there's some skepticism about how real the financial impact will be.

Now, it's interesting. Dan Levy, whom I haven't talked to in a long time, who's a good guy. Who's now, he was running small business and now I think he's running ads.

I'm not sure what his formal title is, but he wrote a post that said Apple's motivated by profit, essentially in doing this privacy initiative. And I agree that Apple is marketing privacy as a differentiator versus Android.

But that's like a Trumpian projection on Facebook's part, like Apple is motivated by profit so they're doing this thing.

No, it's really Facebook who is primarily motivated by profit and is championing, small business. But really it's about their bottom line for them.

One final note. There was a question to ask of one of the small businesses.They had two small businesses on this press call and one of the questions asked was, “Hey, do you even need a website anymore?”

This is a journalist asking this question. Do you need a website anymore? When you have Facebook? And it was almost like the PR people teed that up, but I don't think they did.

And the woman who ran, I think it was African-inspired lifestyle business. And then they made I think handbags with a charitable aspect.

And she essentially affirmed that you didn't.

And I go back to what you know, you guys and others have said historically, which is you really can't trust these giant platforms, to have your interest at heart.

And you have to maintain your own assets because they're going to make a change in it. Maybe very disadvantageous...

David: The three of us were laughing, but the reality is 95% of the business owners who are just getting started. I guarantee you they're creating a Facebook page before they're creating a website.

Greg: Absolutely. Absolutely. It's the mindset. Absolutely. And that makes a certain amount of sense from where their audience is, but at the same time, it's not in their long term interest to rely entirely on those things.

Mike: I don't think it's in their short term interests either. As my case study showed just creating a Google owned website generated significantly more new incoming leads. So there's that issue.

And then the other issue is ultimately you need to own not just your website, but your customers. And the only way to do that is not continue to rent them from Facebook or Google.

Greg: So final point on that newsletter coming out today, which hasn't been published yet.

I didn't expand upon it, but it's a link to a story by Adzooma, which partnered with Cambridge University in the UK to do a study about the efficacy of using Google and Facebook.

And they said, their conclusion, whether you believe it or not, was it Facebook was the most cost-effective marketing channel for small businesses.

That was their conclusion.

Mike: And I would agree if you're doing ads, but I think beyond ads, then I don't think that's true.

Greg: It was ads. This was limited to ads. David, why don't you talk about your items?

David: I'm not even sure if we covered this in the Near Media...

Greg: We did not. We did not. We did not.

David: That's fascinating. Mike tipped me off to the new product that hey.com launched this week. Jason Fried, the founder or co-founder of Hey and also co-founder of base camp has incubated a really interesting newsletter product, which is essentially, sending a newsletter to a world@hey.com address, I'm just sending an email and anyone who has subscribed to hear from you in the whole network will get that message delivered through world@hey.com sort of an a, it's almost like a personalized alias.

And Mike, I thought first of all, I was, I just thought it's a brilliant product idea. I love the simplicity of it. I love the sort of, the personalized nature, the ease of general generating personalized content to be published to a wider audience. So I loved all of those things.

And Mike I thought your comment that it was the full on devolution of the newsletter or of publishing generally. I think, so it's a really radical idea and. whether or not it succeeds, I think it certainly has gotten me, gotten my wheels turning about, how to just radically simplify everything that I'm working on with products for Demand Science and Tidings and everything else we're doing.

Mike: Yeah, I think that one of the things we see that I see regularly is the overwhelming complexity imposed by the technical requirements of Google and a website and Facebook and understanding the ins and outs of these platforms.

It creates a vast opening for an effective, super simple, straightforward mechanism.

I was intrigued by it as well. And I think that most small businesses, if they could achieve success with that simplified world, would jump on it in a flash.

Greg: I think it's not just small businesses. I think enterprise too. Maybe not this particular product, but the notion of simplification is really important.

I'm living in a world of multiple SAAS products that are hard to use and don't integrate and confusing, there's a learning curve. People adopt and abandon them. Simplicity is really. Important for enterprises.

Mike: Yeah, we've seen, at GatherUp, relative to the API, the idea that you could share with any app on the web becomes a gateway and people start charging for API access and all kinds of silly rules to create, or expense to create an integration.

I get there maybe some security issues, but for the most part the APIs that are out there, which could theoretically create this interconnected world have been distorted and perverted to create a fragmented world. It's very frustrating.

Greg: Okay. One, one thing that was triggered in my brain that I want to slip in here that we'll talk about, maybe another time is just the, Twitter announced the subscription product and it's just more and more of these pay to access content, pay to talk to your favorite celebrity or whomever.

There's more and more of these showing up. And I just think it's really interesting development as an alternative to monetization alternative to advertising.

Mike: So is it time for a survey? Should we ask the people listening to us if they're willing to pay to listen to us?

Greg: Not quite yet, but sure.

David: Or not listening to us.

Greg: We get paid, pay to avoid the content, :)

David: Paid to mute one of these panel members.

Greg: Okay. All right. So up you're up, Mike

Mike: So this is a story, I don't normally read Variety, but I came across in my feed today and I thought it was fascinating that Walmart is creating a series of video, interactive cooking shows using celebrities like Patti LaBelle.

And as part of the show, the users can then automate with a click of a button to order the ingredients to the recipe at their local Walmart.

And so it's fascinating to me, one that Walmart, it's a very innovative sort of use of the technologies. They noted that the click through, the conversion rate was as high as 8%, which is very high.

And it's a classic example of online, offline, but using as you mentioned, QVC, sort of environment, which is incredibly targeted and entertaining to generate sales in a local environment.

What are your thoughts?

Greg: I haven't experienced it. I saw the story. I haven't experienced it.

I think it's pretty, pretty interesting. It's a great branding vehicle also in addition to a kind of commerce tool.

And as you pointed out when we were prepping a little bit here, Walmart is doing a lot of stuff, lot of very innovative things, on the back end with the supply chain, but also with marketing and using their stores to support their e-commerce efforts.

So I, I think it's really very interesting and it's  an opportunity for some small businesses, maybe down the line to emulate something like this. There's no capability. There's no fulfillment capability on the small business side, but I think it, I think this is something that small businesses could also do.

David: Absolutely. It seems fairly trivial to set up a bundle in Shopify, right? With this, if you're a food vendor and here's the six ingredients that are used in this recipe, click the button and send them to you.

Greg: That would be an e-commerce model, which would be super interesting.

Yeah, I think that would be Shopify is another really interesting story that we haven't really talked about a lot, but. I don't want to get us off track.

David: We have plenty of Near Memos coming up.

Greg: So Mike, why do you not usually, so what caused you to read Variety in this particular instance?

Mike: Just the article was interestingly titled, came through one of my feeds and was related to local.

I’m on a number of RSS feeds and I just thought the article spoke to me.  I follow Walmart. My son-in-law works there and I find like you, that they're, despite their terrible reputation as a, exploiter of people, there have been very innovative in this sort of online, offline world and have been leveraging their assets and I've tracked the recent robotics move. I track them in the news quite regularly.

I think they're coming to be reckoned with, I think in the end, we're going to see a massive consolidation of commodity retail. Around Amazon and Walmart, because they're the two companies that are most able to control all elements of buying, transporting, and selling.

Greg: And then--

David: There's still this passionate fan base with Costco loyalist which I think they're, slightly different model obviously, but I think that they're there for them.

I also think Target does a great job with customer experience. Typically.

Greg: I think there are a handful. I think the point about consolidation is exactly right. There are a handful of key retailers that are going to control everything and there'll be a number of omni-channel retailers that have stores and use stores very effectively.

And then, everybody else is going to be dependent upon them, either from a distribution, these e- marketplaces and then these big Physical stores, Sephora is opening a whole bunch of stores in contrast to other retailers. But doing a lot of a store within a store, a, they have a partnership with Kohl's.

They used to have a partnership with  JC Penny. I think that's an interesting model where a lot of brands will open the store within store environments to hedge against some of the cost and risk of having their own stores.

Mike: And it, and COVID has accelerated this, the real estate issues are tied into this, the commercial real estate issues, the consolidation of malls and the loss of local brands.

At scale, the Sears of the world, Kmart, it we're in a period for the next 10 years of consolidation where it ends up, David. I agree there may be eight players or 10 players, but it's going to be dramatically reduced, particularly around commodity products.

And then I think there will be room for higher end products and niche products and value added products.

David: I think that's a key point. I think I'm both I'm bullish on – and I don't own a ton of shares, but I own shares in both Amazon and Shopify. I think that there's a place for long-tail e-commerce for SMBs.

Just like I think that the CPG brands that, Johnson and Procter and Gamble and those kinds of companies, those are the ones that are, I think maybe most at risk from this consolidation. I actually think that there's still going to be plenty of room for long tail players.

Greg: One interesting question maybe for us to think about is whether the future of small business retail is really pretty, is dominated by e-commerce.

Because they, because it just becomes really hard for them to compete in a physical retail world.

David: I think it has to be, I think you're, I think small business showrooming... the Bonobos model is really where I see things heading. I think space is getting more expensive in urban markets.

This COVID, may be accepted, but generally speaking retail space is at a premium, at least here in Portland. And you need a small footprint, but you need to be able to deliver products, both in-person and through, through e-commerce.

Mike: I saw an interesting model when I was in Albuquerque last, when I was able to travel and it was a mashup, it was a small game company that sold games, but rented space, a table so you could play all the games and serve desserts and tea and coffee.

Greg: So cafe style.

Mike: Yes, cafe style, big open Apple like tables, where the waiters would come over and explain to you the game rules for some game that you could then play with the six people you brought in. And when you were done, you could buy that game off the shelf.

So it was a very interesting mashup that I think small retailers need to move to that sort of value add level.

Greg: Okay. More to say, but on that note, I think we're at the end of episode four and we will see you next week. Bye. That was great.

David: Good to see you guys.