How can location based social networking help my business?

Gone are the days of an organisation having total control over the marketing information that is placed on websites. What if I told you that the majority of your companies marketing was done by people outside of the organisation. Scared?

Image provided by Renjith Krishnan

With the dot.com bust a number of start up companies went under. This forced IT professionals to develop new models to making the internet profitable. A new revolution of how users would engage the internet was born. The era of Web 2.0 had arrived. Web 2.0 applications provided a platform that enabled collaboration and empowerment to its users.

This paradigm has been coined Harnessing the Collective Intelligence by Tim O’Reilly. There are two key principles that allow this process to prosper. The first key principle is that the users add value. Through the users participation on the web 2.0 platform by creating content, uploading and sharing their ideas and thoughts they are can both directly and indirectly add value.

The second principle is that network effects magnify this value.

Web 2.0 thrives on network effects: databases that get richer the more people interact with them, applications that are smarter the more people use them, marketing that is driven by user stories and experiences, and applications that interact with each other to form a broader computing platform.

By involving users both implicitly and explicitly the interaction will become more meaningful and enjoyable. Web 2.0 technologies should facilitate emergence by allowing the particular application to transform to suit the users needs. The ability for the application to be fluid and less structured will enhance the experience by the users. Web 2.0 applications have been developed to allow users to create web pages and content with little or no understanding of HTML.

Foursquare

Foursquare is a location-based social networking service which is avaliable on smart phones to allow its users to “check-in” to venues they are currently at. This allows users to share their current location with other users they are connected with their foursquare account. There is also a game aspect to the service which allows users to receive reward points and “badges” for each check-in they do. For users check-in the most to a venue, become the “mayor” of that location. Users are also able to leave comments on a particular location they have check-in at. Some businesses have embrassed this social networking service by providing specials and discounts to the “mayor” or other users of foursquare.

Businesses have seen the advantages of customers using foursquare as it shares their business name with other users of the platform and lets them know if they frequent a particular location (eg: coffee shop) which in turn may attract further foursquare members to visit, especially if a positive comment is left

The face of buisness marketing has changed with the use of social media. The inaugural Nielsen-Community Engine 2010 Social Media Business Benchmarking Study found that 70 per cent of all Australian businesses intend conducting some form of social media activity this year, compared with just 40 per cent in 2008. (read more here).

Users that connect on platforms such as foursquare can read people’s personal opinions on a particular business which could influence a customer’s decision more than having that customer exposed to a traditional marketing campaign.

Businesses need to use platforms such as foursquare to connect with these niche markets to discover what the perception is of their buisness. It is a great source of information and is another way that businesses can market to a specific customer base.

Is the LAMP shining on your online business?

Start up costs for an online business no longer require massive capital outlay as they once did. Lessons learned from the dot.com bust as well as the commoditization of hardware, bandwidth, and software have driven prices lower. The introduction of enterprise cloud computing and shift of data storage into the cloud has provided a viable alternative which is both efficient and cost effective.

Companies can now operate in a more cost effective way which helps to support lightweight and scalable business models. By choosing open source software as an alternative to commercial products along with cost effective marketing (network effect) and hardware means that there no longer needs to be big expenditure into large development teams.

Open source software such as LAMP which stands for;
* Linux (operating system),
* Apache (HTTP Server),
* MySQL (database software) and,
* Perl/PHP/Python
have allowed businesses to create application servers at virtually no cost.

iStockphoto the world’s original source for user-generated, royalty-free stock images, media and design elements was built on the LAMP stack. The below video is a preview into how iStockphoto works.

According to Patrick Lohr, the president of iStockphoto, one of the biggest drivers for the use of the LAMP stack was cost (Bradbury, 2005).

LAMP allows minimal capital expenditure prior to identifying what the potential return on investment (ROI) will be.

What businesses need to do is start out and test their business concepts in a way that gets them to market fast, with a proof of concept. It’s what some people call ‘fail fast’. If you have an idea that sucks, find out that it sucks fast. That is what the LAMP stack lets you do (Lohr, 2005).

Although iStockphoto which was started by Bruce Livingstone was totally free it has since evolved and developed a revenue model. This is something that came about as a result of the network effect.

By Livingstone providing his own material free for download it created a massive interest with web designers. Some of these designers began uploading images of their own. Livingstone then polled the growing iStock community to find out if people would support paying for images.

In 2002, iStock began selling credits. Now you could get a high-quality image for under a dollar, and the artist who contributed it got paid a royalty.

It was an entirely new way of doing things. Some people called it the birth of ‘microstock‘.

By maintaining reasonable user costs Livingstone encouraged participation, which in turn helped foster growth, community, and ultimately user generated data as part of an ‘Intel Inside’ data strategy. iStockphoto was designed with strategic and tactical choices which enabled future scaling as the business grew.

By creating a diversified revenue model, including subscription and premium services, companies can build long-term growth and stability as proven with iStockPhoto.

Less of More – Your New Online Selling Strategy

Thinking of running a business online? Well what if I told you that focusing your sales on a small number of products was not the way to go? What if I told you that to gain your advantage over a bricks and mortar competitor you would need to sell less of more! No I am not crazy, I am referring to the theory of leveraging the longtail which was coined by Chris Anderson, the editor in chief of Wired Magazine.

The first graph is an example of the Pareto principle which is also known as the 80-20 rule. In a business context it suggests that 80% of your sales comes from 20% of your your products. Chris Anderson argues that as demand shifts down the tail, the effect would diminish.

The next below is a visualisation of the effect of leveraging the longtail. According to Anderson’s long tail blog, over the course of time if you grow the tail portion of graph,

the potential aggregate size of the many small markets in goods that don’t individually sell well enough for traditional retail and broadcast distribution may someday rival that of the existing large market in goods that do cross that economic bar.

The Long Tail theory suggests that, as the Internet makes distribution easier and technology systems allow consumers to become aware of more obscure products, demand will shift from the most popular products at the “head” of a demand curve to the aggregate power of a long “tail” made up of demand for many different niche products (Wharton, 2009).

Online companies are already identifiying the power of leveraging the longtail and have based their buisness models on this exact theory. Within the music industry platforms such as Garageband and iLike have provided the avenue for smaller bands and musicians to market their product to a specific audience which may not be catered for by the larger commerical music stores such as Sanity Music.

By selling and advertising online through platforms such as Garageband low distribution and inventory costs can allow businesses to realise a significant profit by selling a small volume of hard-to-find items to many customers, instead of only selling larger volumes of a reduced number of popular items (Anderson, 2004). By making their music available online and market it through online communities musicians have the ability to profit from the Long Tail and overcome the limitations of geography and scale. By employing web 2.0 tools to its fullest potential musicians now have the opportunity to discover new markets and expand existing ones, and ultimately expand their fan base.

Making your web2.0 applications work

There is plenty of discussion and debate around online applications versus desktop applications and where the advantages lay.

One of the core concepts discussed with web 2.0 applications is their architecture being in a constant state of “perpetual beta“. Tim O’Reilly discusses this concept saying: “Users must be treated as co-developers, in a reflection of open source development practices… The perpetual beta, in which the product is developed in the open, with new features slipstreamed in on a monthly, weekly, or even daily basis. It’s no accident that services such as Gmail, Google Maps, Flickr, del.icio.us, and the like may be expected to bear a “Beta” logo for years at a time.”

Unlike the release of new versions of products every few years by commercial giants such as Microsoft products that operate in perpetual beta have “come to be associated with the development and release of a service in which constant updates are the foundation for the habitability/usability of a service.” Wikipedia

This means that products operating in a perpetual beta have features introduced almost on a daily basis rather than commercial product where the user must wait for the release of each version for added features and functionality.

Francesco Mapelli believes because users can provide important feedbacks and feature requests, and companies should add and remove tools and services depending on the feedback and their interests. What can (and should) be in perpetual beta is the way small pieces link together, not the small pieces itself.

“Web 2.0 is like LEGO. You have small, simple and colorful pieces, and you build platforms and services with this pieces. You can build something that changes every day, but the small pieces you use must be solid.”

Facebook

Facebook is an example of a web 2.0 application that is operating in a perpetual beta. Since its inception in February, 2004 the social networking leader has constantly provided updated functionality to its service. In 2010, it released an enhancement to its popular photo feature being high resolution photo uploads and an in-line photo viewer to the News Feed. These features came about as a result of Facebook listening to its customer base on what features they were looking for.

A further enhancement that came about in October 2010, was the drag-and-drop organising. Demonstrated in the video below, drag-and-drop organising is exactly as it sounds; users can now drag and drop albums and photos into any order they desire.

.
Amazon.com identifed that moving developers closer to both operations and customers creates a feedback loop that improves both quality of technology and service. This same principle was employed by Facebook which has resulted in an enhanced product brought on by the feedback of its customers.