Posts Tagged ‘Pinterest’

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Earlier this week, I wrote about what Moneyball‘s Peter Brand called the “epidemic failure to understand what is going on” plaguing the business, marketing and advertising worlds – when it comes to understanding that social media and social business are not just extensions of traditional “digital” strategies. Yesterday, I was reminded by both Christopher Barger and Justin Whitaker that the same type of off-target thinking is also plaguing other aspects of the world of business, particularly when it comes to the ever hot world of the dot-com.

If you read that post, you’re already 80% of the way there. What follows will fill in the remaining blanks for you. Here is basically how this plays out:

Christopher Barger (on Facebook): And the bubble burst countdown is officially on in 3…2… 1. The “logic” behind this claim is utterly insipid. And we’ve seen this movie before, folks. It came out in 1999 and was called the Dotcom boom. Dear social media business: Stop it. Just. Stinking. Stop it.

Here is the story he is referring to: Forbes – Pinterest is a $7.7 Billion Company. Below are a few clips from that Forbes piece.

Facebook values Instagram at $1 billion and LinkedIn (LNKD) has a market cap of $10 billion. Twitter claims it is worth $8 billion. So where does that leave the new kid on the block Pinterest? Well, it looks like you can pin $7.7 billion on your Pinterest board.

Pinterest is important because the traffic is growing and statistics are impressive. It is known for its magazine quality images. Pinterest is to artful images what Twitter is to artful words. What’s more, Pinterest appeals to college-educated females between the ages of 25 to 44. A sweet demographic known for its spending decisions and habits.

According to the scoreboard from Experian Hitwise data from March 2012, Pinterest is the third most popular social media platform in the United States. It is running close behind Twitter in the number of total visits. Facebook is the big beast at seven billion total visits, Twitter while very far behind, is logging 182 million visits. Pinterest is next with 104 million and gaining quickly.


Pinterest scored 21.5 million visits for one week at the end of January which was an increase of 30x from six months prior. So we can try to place a value on Pinterest by visits alone. If LinkedIn has 86 million visits and a market cap of $10 billion that values the visits at $116. By that method, you could pencil in a value of say $12 billion for Pinterest.

I am not making this up. It gets better.

Worth of Web, a website value calculator places Pinterest’s value at $267 million. It says the company has 10.8 million daily visits and 324 million monthly visits. It claims daily revenue is $74,520 with annual earnings of $26 million. Unfortunately Worth of Web seems to be way off on its valuations. For example, Worth of Web only values Yelp! (YELP) at $115 million, while it currently has a market capitalization of $1.5 billion. It also grossly underestimated Instagram at $2.6 million. But if we take the Yelp undervaluation and apply that to Pinterest, you get roughly $3.4 billion. Not so far-fetched these days. 

[…] Thus, grabbing an envelope and scribbling on the back, I split the difference between the two previous valuations and come up with $7.7 billion.

Don’t get me wrong: I love Pinterest, and I think there’s big potential for the platform, but I’m also not stupid. I can put its potential value in perspective. And I know how easily bad metrics, bad measurement schemes, bad assumptions can put us all in the weeds. Forbes evidently… not so much.

Look at that ridiculous valuation model. This is how a young company with $75,000 in daily revenue (according to that piece), by being compared to other overvalued companies, can magically find itself valued at $7.7 billion. Even if its revenue grew 30x in the next year, (and that is a very big “if”), you would be looking at $780 million/year. Can we say now that Pinterest has a 10-year shelf life? Where is that $7.7 billion coming from? Or that even more fascinating $12 billion figure? This? Nope. Pinterest, like every other social platform won’t be disrupting the market that long. Something else will come along to take over and kill its momentum, and it won’t take ten years.

So thanks, Forbes, for that enchanting little ride on the magic math train. Welcome to the fairy-dust world of equivalency equations – the same equations that lead agencies and brands to mistake the cost of acquiring an impression to the market value of a follower, to the notion that a Facebook fan is worth $372.99 without ever taking into account that fan’s purchasing behaviors, to the notion that a random start-up with no revenue model might simultaneously be $70M in the red and worth more than Luxembourg and the Isle of Man combined.

As Chris points out, we’ve been here before. But this is just the layup. There’s more:

Justin Whitaker (on Facebook): Olivier, did you see Calacanis’ newsletter on recent valuations? Gives you some insight into what is going on. His end result is that we have competition for good teams, and that’s pushing valuations up. To my mind, that’s exactly what’s wrong with what’s happening . We’re valuing teams, not revenue models.

That last sentence. Sound familiar? Remember Peter Brand’s conversation with Billy Beane from yesterday’s post? Hold that thought. Here is what Jason Calcanis had to say on Launch:

 Is the internet industry experiencing a bubble? Yes there are bubbles, but those bubbles make up the froth on top of the massive rising tide of value being startups are creating today.

The $210M sale of OMGPOP and the $1B Instagram purchase feel like a bubble, but you have to step back for a moment and realize that OMGPOP was purchased for 2% of the value of Zynga and Instagram for 1% of the value of Facebook.

Now, are Zynga and Facebook overvalued? Well, that’s a separate email of 2k words. The short version is they are aggressively valued based on their massive growth. I’ve heard folks say that $10B for Zynga and $100B for Facebook are anywhere from 0 to 30% rich. Most folks believe we are seeing a premium for growth — not a bubble — in these stocks.


What we’re seeing now is founders doing their jobs: getting the best price for their teams. Angels are willing to pay under these terms, so they are essentially saying they’ll give up the first 2x to 3x of a deal’s return in the hopes of getting YC’s next Airbnb or Dropbox. (Those two investments are up 50x to 300x since their YC days.)

Most angel investors have their activity covered by one big hit. Bottom line: It feels like a bubble, but it’s really just a hot market.


We’re not in a bubble. We’re in a revenue tsunami like nothing any of us have ever seen in our lifetimes.

In a market like this, founders shouldn’t optimize for valuation. They should optimize for getting the involvement and attention of the best investors who provide the best long-term value.

And there you have it: “We’re not in a bubble. We’re in a revenue tsunami like nothing any of us have ever seen in our lifetimes.” Us  meaning founders and A-round investors, industry insiders who invest in, buy and sell companies early, based on “potential growth,” rather than real world, sustainable revenue models (that’s a very different game). Every time one of these “we don’t know how to make money yet” companies gets slapped with an inflated value before being sold off to a Facebook or a Google, what do you think the real game is? That’s right: maximizing profit for the team of early investors who got them all prettied up for their big market day. There’s nothing wrong with it, mind you. Calcanis isn’t a bad guy. His business model works for him, his team and the people who spent a couple of years building really cool technology. But because most of the game is being played pre-IPO, the further down the river you are in the investment chain, and the higher the “valuation,” the further away you are from the reality of what dividends that company can actually produce for its late investors. At least Zynga has a revenue model. It’s being run and managed like a real business. But most of these young companies either don’t, or what meager revenue model they have is not nearly on par with their market cap. That’s a problem.

$7.7 billion for Pinterest. I want you to think about that. I want you to think of the gap between that $26 million in actual annual revenue mentioned in the Forbes piece and its subsequent $7.7 billion valuation fantasy. Why not $300 billion? Why not a zillion dollars? Could happen, right? And maybe if you follow the same thinking, maybe if VCs keep telling us all day that this isn’t another dot-com bubble, we’ll all stop asking.

So one more time, in case you missed it earlier, from Moneyball:

Peter Brand: There is an epidemic failure within the game to understand what is really happening. And this leads people who run Major League Baseball teams to misjudge their players and mismanage their teams. I apologize.

Billy Beane: Go on.

Peter Brand: Okay. People who run ball clubs, they think in terms of buying players. Your goal shouldn’t be to buy players, your goal should be to buy wins. And in order to buy wins, you need to buy runs. You’re trying to replace Johnny Damon. The Boston Red Sox see Johnny Damon and they see a star who’s worth seven and half million dollars a year. When I see Johnny Damon, what I see is… is… an imperfect understanding of where runs come from. The guy’s got a great glove. He’s a decent leadoff hitter. He can steal bases. But is he worth the seven and half million dollars a year that the Boston Red Sox are paying him? No. No. Baseball thinking is medieval. They are asking all the wrong questions.

Now here’s Justin again:

“To my mind, that’s exactly what’s wrong with what’s happening . We’re valuing teams, not revenue models.”

Let the wheels turn.

But because I am neither a VC nor a startup founder, maybe I have this all wrong. But then again, maybe all it is is just a big game of hot potato whose object is to keep all of the potatoes in the air while investors like me and you and our banks get sucked into collectively investing billions of dollars into fledgling companies that have yet to generate as much as 1% of their market cap in revenue.

The VC game might just be this: get in with a million bucks, get out with a billion, pass the hot potato on down to the suckers who see a score but haven’t figured out that unless these companies find a way to actually make money and pay investors back, it’s all basically a big fat ponzi scheme. What’s the secret? Everyone needs to stay focused on the imaginary bag of money at the end of the road, the Google dollars, the Facebook pesos. If the value of these startups keeps growing exponentially (like a Pinterest or an Instagram going from $5M to $1B+ in 18 months) we can all believe that we’ll become internet millionaires if we only invest in them when we get a chance. It’s that simple. The bigger the valuation, the more attention it attracts. $8B? Wow. Let’s all buy that dot-com lottery ticket!

Have you ever chatted with a VC or an angel investor? Nine times out of ten, here’s what you’ll hear: “We’re not investing in the company. We’re investing in the people. Because we know that even if this company doesn’t make it, eventually, these people will build something big. That’s what we’re really investing in. That’s how it works.”

We’re not really investing in the Brooklyn bridge. We’re investing in the architects. Unfortunately, to do that, you have to get people to back up your investment by buying the bridge from you, preferably for a lot more than what you paid for it. If 5x is good, 30x is better. How do you do that? By convincing them that your bridge is worth 100x of its actual value. The process behind that isn’t all that hard. The pieces are already on the board. All you really need to get things started is for someone with an imperfect understanding of where value actually comes from to write a piece about you in a publication like Forbes, Mashable or the WSJ. Five years ago, it was hard to get that done. Today, most big circulation publications also have online versions whose editorial standards are… well, lax. Their contributors aren’t always journalists or even analysts. Many are little more than glorified copywriters, underpaid to create content whose only purpose is to drive page views. A simple phone call from a senior exec promising an exclusive, or a friendly beer and a little attention can score you the story you want them to write.

Here’s another dose of reality: Companies like Google and Facebook are businesses, just like Nike and Apple. They have to be able to run in the black at some point. That means that there comes a time when buying $7B companies that don’t generate enough revenue to pay for themselves eventually comes to an end. That acquisition game only makes sense in the very short term on when it comes to sacrificing black ink for a strategic move that hopefully isn’t entirely Pyrrhic in nature. Growth through the acquisition of upside down companies just isn’t sustainable. Look at it this way: If you’re eagerly buying stock in a company valued at $15B that only generates $200M per year in revenue from, say, advertising, and inflates its market value by buying $1B startups with no significant revenue stream every six months to make it look like they’re growing and making big moves, it doesn’t take a genius to see where the value of that stock is really going. What’s the company’s plan, then? To keep borrowing money from investors? To get banks in so deep that they can’t pull out without taking  a huge hit? To keep acquiring overvalued companies with Monopoly money and hope no one ever decides to cash-in their chips?

This is part of the mechanism that creates bubbles.

No matter how many companies with zero revenue you acquire, math is math. Profits are profits. You can’t keep promising “next year” forever. And when company valuations start hitting the stratosphere and the gap between price and value starts to look like the Grand Canyon, people finally stop being stupid. That’s when things get dicey.

Think of it as a game of hot potato. What’s the objective? To keep the potato in the air as long as possible.  The way it works is nobody stops to look at the potato. Nobody wants to get burned or miss the next toss because then it’s game over. How do you keep people playing? You convince them that the longer the potato stays in play, the more value they will get out of it. And as long as no one flinches, as long as no one asks questions, as long as all the potatoes stay in play, the game goes on; people who know how to get in and get out at the right time make money and the rest keep on paying and playing, not realizing that what happens when the music stops is they find themselves holding a old wrinkled-up overpriced potato. They were so focused on playing the game that they never stopped to look at what they were really buying. It’s what happened with the first dot-com bubble, it’s what happened with mortgages in 2008, and it’s what is brewing here too.

We’re valuating teams, not revenue models.

Here’s some perspective: Apple sells iPhones and iPads and media all over the world. It’s the biggest tech company on the planet. It’s so big it generates profits on the same scale as the world’s biggest energy companies. Starbucks sells zillions of gallons of coffee in little cardboard cups at an insane premium, and every day, millions of people eagerly pay for the privilege of walking around the office with their logo in their hand. McDonald’s sells burgers and fries and soda in almost every country in the world. Every morning, there’s a line of people getting their McCoffee and Egg McMuffins at virtually every McD’s on the planet. Ford sells cars. Lots of cars. Cool cars, even. Levi’s, RayBan, Coca Cola, Amazon, they all sell something a lot of people want. They generate insane amounts of revenue. What’s Pinterest selling? What is its revenue model, to be worth $7.7B?

Oh yeah… it gets web traffic. 104 million visits in March. My bad. $7.7B it is then.

Based on that equation – or more to the point, that kind of thinking – this blog should be worth $2.7M.

Tell you what: here’s a bargain. If you’re willing to pay cash, I’ll sell it to you right now for $2M even. Any buyers? No? I didn’t think so.

There is an epidemic failure within the game to understand what is really happening. And this leads people who run Major League Baseball teams to misjudge their players and mismanage their teams.

That. And this: there is a disconnect between the message and what is actually happening.

Do yourselves a favor: think. Ask the hard questions. Don’t just read Forbes or some industry white paper and take what’s being sold to you as gospel. Don’t surrender to marketing religions or measurement cults or self-serving sales pitches disguised as business philosophies. Challenge whatever conventions that make you raise an eyebrow or gasp in surprise. If you don’t understand something someone just presented to you, don’t delegate. Don’t leave that room until you understand every aspect of it. Don’t make a decision until you have left no stone unturned.

Why should we invest in a company with no revenue model?

Why is a Twitter follower valued the same whether she is a transacting customer or not?

Why are these qualifications even relevant to this role?

Why is content king?

What do you mean, “we’re investing in people, not the company?”

What’s your angle in this deal?

Question whatever business thinking that keeps you stuck in the same cycle of “why aren’t we doing better?” Bad insights lead to bad decisions. It’s painfully simple. The way you run your business, the way you hire people, the way you invest your resources, even the things you believe are real because you read about them in a magazine, it’s all the same thing. Mistakes all come from the same place. You want to know what the hottest product is in 2012?  It’s bullshit. The stuff gets sold by the ton. It’s hotter than gold, oil and cocaine combined. It’s even bigger than internet porn. My advice: Buy something better.

Then again, I could be completely wrong. You tell me.

*          *          *

Here it is. A whole book on how to make social media work from a business standpoint. ROI is covered, along with a lot of process elements that tie back to it. If your favorite social business “expert” doesn’t seem to get this stuff yet, don’t feel bad about sending them a copy. Knowledge is never a bad gift.

CEO-Read  –  Amazon.com  –  www.smroi.net  –  Barnes & Noble  –  Que

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Source: Guardian UK / Corbis

It’s weird that fortune-tellers tend to work for carnivals rather than Fortune 500 companies. If I were a CEO, I would want to hire people who can see the future. It would save me a lot of heartache and worry. I could focus on the product R&D programs that I know would work and wouldn’t waste resources on projects that won’t. Deciding upon a course for a marketing campaign wouldn’t be such a dilemma: Do we go with the talking monkeys or do we tie our product to the Star Wars franchise?

Okay. Fortune-telling has its creepy disadvantages: Most people don’t want to know when or how they will die. Many of us want to discover what is around the next corner without spoiler-alerts. If you take all the mystery out of life, what’s the point? But there are advantages to having someone around who can see a little further down the line than others: Maybe you re-book your flight. Maybe you buy that lottery ticket. Maybe you start wearing sunscreen at a young age. Maybe you invest early in cool little start-ups like Apple and Nike (just like Forrest Gump did). Maybe you sign an author with promise before she has penned her first draft of her boy-wizard story.

Maybe you get the jump on your competitors every single time you make a move. Think products, services, channels, processes, even hires. Imagine if you could get a 12-18 month head start on everyone else in your industry. Wouldn’t that be nice? Wouldn’t that make a huge difference in how your business runs?

Well, like I said earlier, fortune-tellers don’t work for Fortune 500 companies. But trend-spotters often do, and when it comes down to it, that’s almost as good.

Source: Getty Images

Gentlemen, place your bets!

By trend-spotter, I don’t just mean hipsters who hang out with the cool kids until 4:00am and can tell you what the next hot street fashion is going to be, though for apparel makers and retail buyers, that’s pretty important. These folks prepare their seasons months in advance. If they get the trends wrong, three things will happen: 1. Their sales revenues will tank. 2. They will end up with a ton of inventory they won’t be able to get rid of, even at 70% off. 3. Their brand’s relevance will be put in question. They will lose market share. Ergo: Complete disaster.

Every year, companies place bets on a million things: Products, campaigns, services, technology, programs, media buying, hires, trade shows, agency selection, you name it. When you take a step back, it looks a lot like a giant game of pin the tail on the donkey. Nobody really knows if anything is going to work. For every reason why something might, there are three reason why it might not. Any decision-maker anywhere will tell you the same thing: They are in the business of taking risks. Calculated risks, but risks nonetheless. The philosophy then is this: Big risk have the potential for big rewards, but also costly blunders. Small risks have far less potential for rewards, but don’t sting quite as bad when things don’t work out.

This would be a great time for me to segue into the vital connection that exists between vision, courage and leadership, but that isn’t what this post is about. What we are talking about today is trend-spotting: The function within an organization that helps decision-makers minimize the potential for poor strategic decisions and maximize the potential for good strategic decisions. Every day, the big strategic croupier calls for business leaders’ bets, and every day, that call must be answered. Wouldn’t it be nice for these folks to have a roulette or card-counting savant at their side, whispering in their ear what plays will yield the highest probability of success?

Source: Google.fr

In the apparel industry, that savant’s job might be to attend fashion shows all over the world, hang out at popular night clubs, watch teenagers hang out at the mall or at skate parks, or just take regular trips to Tokyo, Paris, Milan, London or New York.

In the tech industry, that savant’s job might be to attend tech shows, hang out with venture capitalists, talk with a lot of start-ups, read key blogs, take regular visits to Silicon Valley, San Francisco, Boston, New York, Antwerp, and wherever else innovation is taking place.

These folks don’t have a crystal ball, they can’t actually predict the future, but they see what’s happening. They know what people are working on. They can spot innovation and place it on a timeline. They can see trends emerging and can gauge their momentum. They see how all the pieces fit. They don’t just have their eyes open, they also have a nose for it.

How do you think some mutual funds beat the S&P year after year? What do you think makes the difference between a great quarter and a lousy one for most businesses? Luck? Well… okay, there is always an element of luck. But luck strikes where and when it pleases. Industry giants aren’t betting the farm on a rabbit’s foot. Luck has nothing to do with engineering patterns of success. Having the right people onboard whose job it is to not only keep their eyes open but also understand where things are going, does.


Bubble Blindness Syndrome

Having worked with a lot of companies over the years, I have come to observe that most organizations tend to fall into one of two categories: Organizations that are connected with the world around them (not just their market), and organizations that operate in a bubble.

Save yourself the trouble of arguing that bubbles come in all sizes. I know. Some bubbles are thinner than others. We are talking about varying degrees of disconnect here. Having said that, bubbles are bubbles. No matter how thick or thin, no matter how permeable or impermeable, bubbles effectively shield companies from the outside world. They aren’t just cultural cocoons; they also create a wall of opacity that makes any kind of trend-spotting impossible. As you can surmise, bubbles are bad.

Would you like to know a few symptoms of bubble-wrapped organizations. Here are a few:

  • They have to hire people from outside the organization to go find out what their customers are saying.
  • They have to hire people from outside the organization to go find out where their customers are playing.
  • They have to hire people from outside the organization to tell them what new technologies they should use.
  • They like to “wait and see” what the market will do and what their competitors will do.
  • They have to hire people from outside the organization to tell them what the market and their competitors are doing.
  • They often operate under the delusion that by virtue of the fact that they have been in business for 50 years, they will still be in business 5 years from now.
  • They believe that having been relevant in the 20th century automatically makes them relevant in the 21st.
  • They rarely hire from outside the industry. Most of their managers and executives have either worked there all of their careers or used to work for their competitors before coming to work for them. In these organizations, seniority and tenure in the industry are prized far above ingenuity and strategic insight.

It is virtually impossible to see what is coming next if you lock yourself up into a windowless room all day long, day after day after day. It is also VERY difficult to score big wins, much less engineer a string of them, if you have disconnected yourself from the field.

One of the first people I always ask to meet with when I begin working with a client is their director of innovation. This all too often draws blank stares. The people in the room with me look at each other and flex their eyebrows at each other, trying to figure out who that might be. Invariably, the question is asked: “How do you mean?”

“I mean who manages innovation for the company?”

Crickets. Then begins the discussion. “Maybe he should talk to Pete in I.T.” “Yeah, or Mike, our COO.” “Maybe Louise in Digital?”

“Okay,” I ask. “Who’s in charge of consumer insights?”

Crickets. “Um… maybe Paula in marketing?” “I think our agencies handle that.” “We work with research firms.”

And you wonder why so many companies adapt to change slowly, why so many CEOs tread lightly when it comes to integrating social media channels into their communications mix, why the ship turns so painfully slowly when it comes to incorporating social business principles across an organization.

Everyone is so task-oriented that companies forget the importance of using qualified spotters and scouts to help with navigation.

It isn’t about Pinterest. But in a way, it is.

I can’t go ten seconds without seeing an article about Pinterest all of a sudden. The company’s name is on everyone’s lips. And naturally, every strategic meeting I go into, Pinterest comes up: “What is this Pinterest thing I keep hearing about? What does it do? is it the new Facebook? Should we be on it? Bob, call Pete in I.T. See if he can join us. He probably needs to hear this.”

Pulling up Pinterest on the big screen and giving them a demo isn’t enough. You also have to give them context, and aside from numbers and demos, here is all the context they need:

“It’s interesting to see how conservative marketers are being with Pinterest. There seems to be a lot of wait-and-see happening and many pokes at how people are planning for action they’ll never take. I’m all over Pinterest and would recommend it as a strategy to many of my clients. I’ve been on Pinterest for about 6 weeks, or so. Just this morning I received the 7th thing I’ve purchased after seeing it on Pinterest and following the link to the main site.” – Sheila Germain

There. Get it? People share stuff because it’s fun. People discover that stuff as a result. Then they buy it. Your socks, your car, your leather gloves, your #2 pencil: The more people post about it, the more mindshare you earn and the more you increase your chances that people will buy it. Why this works doesn’t matter. That it does is what matters.

It’s like advertising without the advertising. It’s word-of-mouth publishing. Compared with the relatively low cost of being there, a platform like Pinterest can yield enormous dividends.

Now here’s the choice: As a company, you can sit around and talk about strategies year after year after year. You can hire consultants and research firms and agencies to tell you what’s hot – or rather what was hot last year. You can scratch your heads at all that newfangled stuff and end up “sticking to Facebook” because you’ve already committed to it this year and it is a known quantity. You can operate under the premise that if Pinterest is still around in three years, it will have probably grown into a legitimate channel that you will want to invest in. Until then… Meh.

Or, you could wrap your mind around the potential that this and other new platforms or products have to offer and see what you can do with them. I don’t mean just task your agency with proposing a campaign that includes Pinterest or whatever next thing comes along (although… knock yourself out). I mean start thinking about ways that new platform and product capabilities fit into what you are trying to do: Sell something. It doesn’t matter of your company makes toothpaste, aluminum foil or ball bearings. It doesn’t even matter if you’re a non-profit or a government agency tasked with promoting good hygiene in the workplace. Use your brain: How could you use this?

But this isn’t about Pinterest. Pinterest is just one platform. There will be others. New ones pop up at regular intervals. So the question bears asking: Who in your organization was the first to bring up and recommend Pinterest? Who was the first to see the angles? For that matter, who first started talking to you about using Facebook and Twitter a few years back?

If no one in your organization saw this coming (or thought to bring it up), you have a serious problem. Your bubble has reached maximum density. You may not see it, you may not even believe it, but aside from a few narrow channels whose relevance is at best limited, you have become completely disconnected from your market and the world at large. Denial won’t help. Accept it and do something about it. Today.

On the flip side, if you are fortunate enough to have someone on staff who noticed Pinterest a few months back, if some of your managers or staffers even suggested that perhaps you should look into it, my question is this: Why didn’t you listen to them? The question is worth a few minutes of your time because at its heart is a key reason why your company is not doing as well as it should be.

The business sense of funding the trend-spotting function

Catching the right wave, not just once but set after set, requires both focus and insight. It also requires a certain instinct, honed over time through trial, error, habit and acclimation. Understanding emerging trends is about far more than crunching numbers and poring over data. The process of becoming good at this sort of thing, with or without the benefit of having a natural talent for it, requires deliberate investigation, long periods of observation, layer upon layer of context and interpretation. Perhaps most important of all, it requires exposure to the environment where the events leading to the trend will take place.

Understanding what comes next by putting all the pieces together isn’t something that can be done via a thirty minute conference call with an industry analyst who also spends most of his or her day sitting in an office, compiling reports.

If you seek to understand a thing, go observe it. Go touch it. Go live as close to it as you can for as long as you can. You aren’t going to ever understand lions by reading statistics and reports about lions. You’re going to have to go out to where the lions are and study them yourself, in their natural habitat. The same is true of consumers, of markets, of people. You can’t anticipate their needs and wants, their shifts in preference and taste from inside a corporate cocoon. You have to go out there. You have to talk to them, listen to them, hang out with them. In other words, you need people inside your organization whose focus is not a computer monitor and a set of spreadsheets, who don’t spend every minute of their day being pulled into pointless meetings or replying to email threads or entering data into a system.

In the best of worlds, you would create a business ecosystem that would allow most employees to become trend-spotters too – managers and staffers alike. Ideas and insights can come from anywhere, and so it makes sense to increase your potential for good ideas in this way. That is one of the promises of social business, by the way.

But the reality of most organizations is that people are simply too busy with a mountain of daily tasks to be able to effectively serve this function. (At least for now. Today.) They can participate in it, they can occasionally make game-changing contributions to it, but they just can’t be counted on to manage that function on a daily basis.

And yet, someone has to.

Let me say it again: Someone has to. Without this function, your organization is pretty-much flying blind. For all the bravado of many a self-important manager who “just knows” he is right about something he will gladly admit he knows very little about, for all the wishful thinking in the world, rare is the company that hits all the right notes quarter after quarter that doesn’t have a function like this in place, staffed by the right kind of people. Whether you are Gucci, Ford, the Obama campaign, Edelman Digital or Apple, this function is deliberately fed, fostered, and put to obvious good use. Most organizations, unfortunately, are not so forward-thinking in the way they operate.

The alternative is this: To be strategically, tactically, operationally disconnected from a changing world – an ever-evolving world – that doesn’t give a damn that you have been in business for 20 years, or 50, or 100, a world that only cares about two things: Do you provide the most value for my money or attention today? Will you provide the most value for my money or attention tomorrow? You can go with wishful thinking and the hope that “things will turn around” all on their own and see where that takes you.

Some quick and simple advice:

Don’t focus too much on Pinterest. Like every digital/social platform, it will have its rise and its fall. Right now, Pinterest is hot. Chances are that it will remain so for some time (long enough to be worth making a few plays with). But as we have seen time and time again, whether Pinterest sticks or fades into fad country, new platforms will come to compete against it for our collective attention the same way new technologies will disrupt the way we shop and do business, and new fashions will disrupt the way we dress. The question is this: What are you doing about it?

Before I go back to my croissants, I want to leave you with three simple points:

1. Assess your ability to spot trends: If you didn’t see Pinterest coming, your organization doesn’t have an adequate trend-spotting function in place. Either you don’t have one at all, or you thought you did but it failed pretty miserably. Whichever one it is doesn’t matter; the result is the same. Let that be your litmus test for this quarter. Unless you are growing at a double-digit rate and whooping your competitors, I would make that an item of immediate concern. Fix it. Learn from the winners. They get there first for a reason.

2. Think short-term and long-term: Some technologies and trends are slow to mature. I remember being shown technologies and devices 6 years ago that are only now entering the mainstream and will take another half decade to really change the way businesses operate. That’s okay as long as you understand the timetable. It’s as important to know what is coming 5, 10, 15 years from now as it is to know what will be hot in 6 months. Why? So you can start thinking about your company’s path beyond next quarter or next year. Being able to see the changes on the distant horizon is probably the most important factor in any organization’s ability to effectively adapt to BIG change, if not lead that change outright.

Short term focus is also pretty important. Some products just come out of nowhere and take markets by storm. Their development might be stealthy, or just completely out of the way until a journalist at Gizmodo, Mashable or Elle discovers it and turns it into a massive success. Look for those short tickets too. If a horse you have never heard of looks really good two weeks going into a race, pay attention. You don’t always have to score massive wins to roll on ahead. A series of well paced small wins can have the same effect and create excellent growth momentum.

Keep an eye out for anything that will help your long game and your short game.

And remember: The sooner you spot an opportunity, the more time you have to leverage the hell out of it.

3. Be operationally nimble: When a platform like Pinterest pops up on your radar, be ready to seize upon the opportunities it has to offer. If you are a chocolate maker, a flower shop or a jeweler and you only just found out about something like Pinterest a month before Valentine’s Day, don’t put yourself in a position where your company can’t bridge the gap between potential and experiment in that month-long window. You can’t afford to wait until next year to give it a shot. Everyone else will be using Pinterest next year and your first-mover advantage will be gone. Make sure your organization is nimble enough to change course (or test a new channel, product or technology) quickly. If you suddenly realize that the hot new fashion accessory in Tokyo is fingerless gloves but you just received an order for 10,000 pairs of full-fingered gloves, be ready to invest in a bunch of Kai scissors and retool a bit as needed. Today. Not two months from now when you have to sell your entire stock at 70% off.

The faster you can move on an opportunity, the more likely it is that you will score a win (or avoid a catastrophe). Works every time. Spot. Scout. Keep your eyes open.



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CEO-Read  –  Amazon.com  –  www.smroi.net  –  Barnes & Noble  –  Que

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Yesterday, Michael Wagner pointed me to this piece from Cindy Au (@Shinee_au on the twitternets) on the Matter Anti-Matter blog. It focuses on an interesting little incident that happened between Pinterest, a user, and the Mitt Romney campaign. You should go read it in all its glory here. Below are several of the good parts. Here’s how Cindy sets up the initial problem:

Recently, Pinterest was asked by officials from Mitt Romney’s campaign to change the name on the account of a user who had created a satirical board poking fun at Romney’s, how shall we say, epicurean tastes. 

While it’s clear the Pinterest team appreciated the commentary and creativity that Eric’s board brought to their site, when it comes to setting a precedent for the rest of Pinterest’s community, things like fake accounts and impersonation swing both ways. It’s not long before you have more fake accounts pinning items and proliferating ideologies that may not be so easy to stomach. 

In fact, Pinterest’s terms of service clearly prohibit impersonations. Here is the exact section. If the link doesn’t work for you, here it is:

General Prohibitions (Things you agree not to do): 


– Impersonate or misrepresent your affiliation with any person or entity

There it is in clear black and white Anglo.

So… it would have been easy for Pinterest to deactivate the account outright. It wouldn’t be the first time that a social network shut someone down for the slightest infraction, no matter how benign or accidental. (Facebook, I am talking to you.) Pinterest would have been well within its rights to drop the hammer on the evil little user who dared spit in the eye of their TOS. But they didn’t. Instead, Enid Hwang, Pinterest’s community manager, sent Eric this message:

From: Enid Hwang
Date: Fri, Feb 10, 2012 at 9:51 AM PST
Subject: Pinterest: “MittRomneyGOP” username
To: Eric Spiegelman

Hi Eric,

I’m Enid, the Community Manager at Pinterest. As you might have guessed, I’m writing regarding your username “MittRomneyGOP.” We were recently contacted by officials from Mitt Romney’s campaign because they feel it’s very misleading and they’re requesting that it be changed to “fakemittromney.”

We actually really appreciate political commentary on Pinterest – and I know your account is clearly satirical – but we’re a young company so we don’t have a feature/process in place for “verified accounts” (such as Twitter) which would make the purpose of your account immediately obvious to any user on the site.

If you don’t mind changing your username, let me know. Or, you can just go ahead and make the switch yourself at: https://pinterest.com/settings. We’ve been brainstorming alternatives and unfortunately we feel changing your profile picture or adding a byline on your “bio” section on Pinterest may not be sufficient because that information isn’t included with all pins that propagate through the site.

We’re also really open to discussing the issue more with you, so you can reach me directly at [REDACTED] if you have any questions.

I’m sorry for the trouble and again, don’t hesitate to call if you’re concerned about this!


One word: Human.

Here are several others: Mature. Respectful. Professional. Kind, even.

So what happened? Eric Spiegelman responded (somewhat nervously) with a plea to Pinterest. Here:

Hi Enid,

Obviously I understand your concern. And I can imagine as a new company (one that’s really doing a great job), you’d prefer not to have hassles like this. But at the same time, you’re a publishing entity that’s more or less open to the public, and I can’t in good conscience change my parody at the request of the subject of that parody. It should be obvious to the Romney campaign that nobody sees this as official, and that I am exercising my Free Speech rights in making fun of Gov. Romney’s utter tone-deafness when it comes to matters of privilege and class inequality.

That being said, I understand that you are well within your rights to delete my account. But I really hope you choose not to.

You have a wonderful service in Pinterest, and I wish your team all the best, however you proceed with this.


No expletives. No anger. No “you suck” and “how dare you” indignation.

Lesson 1: Enid’s tone in the initial message set the tone for Eric’s response.

Lesson 2: Initiative matters.

Now check out how Enid responded to Eric’s plea.

Hi Eric,

Thanks for getting back to me so quickly: We have no intention of deleting your account. It’s satire and it should stay! We’ll change the username (this doesn’t affect your boards, pins, or anything else about your profile settings) and we feel that’s sufficient. Once we institute verified accounts this, and any future issues, will be taken care of universally. That’s our responsibility so sorry again for having you caught in the middle of it.

I really appreciate your note (and compliments!) and thanks so much for your understanding,


Note that Enid struck right to the heart of Enid’s central concern: “We have no intention of deleting your account.” Perfect.

He then offers a compromise, which… may not have been ideal for Eric, but solves the problem for everyone (Mitt Romney’s epicurean tastes notwithstanding).

The first remark I want to make is this: The way Pinterest handled this violation of its TOS shines in sharp contrast against the way Facebook handles its TOS business. This is the proper way to handle TOS infractions of this sort. This is the proper way for a company to treat its customers, users and fans: With kindness and respect rather than with a stick, a whip, or a hammer.

The second remark is more of an outline, really. How to handle customer care & community management responses in instances like this:

1. Identify the problem.

2. Understand the problem.

3. Understand the ramifications of the problem for all parties involved.

4. Outline several solutions/compromises.

5. Reach out to the individual responsible for the problem in a non-confrontational, non-threatening way. Stiff corporate tones here probably won’t have the desired effect. Be human. Be relaxed. Be professional but somewhat informal.

6. Politely and kindly explain what the problem is and why it is a problem.

7. Appeal to the individual’s sense of community and fair play. This is important.

8. Offer one or several compromise(s) so the individual feels empowered to make a choice. This steers him/her in the right direction without any strong-arming.

9. Address whatever fears or apprehensions the individual has. Recognize that this is stressful. Make him/her feel at ease.

10. Apologize for the inconvenience. Empathize.

11. Thank the individual for his/her understanding, patience and sense of fair play. Be appreciative of his/her support. Bond.

12. Throughout the entire process, remember that just because you have the power to be an asshole doesn’t mean you should. Treat people well. Treat people well. Treat people well. Repeat this as many times as it takes. Human beings deserve kindness and respect, whether your product is free or not. You want to know the secret to loyalty and positive word of mouth? The first half: Great products at a fair price. The second half: This. It’s that simple.

Or… you could just hide behind the usual excuse (“we don’t have the manpower to deal with every case in this way”), suspend account after account without explanation, make a point of being as impersonal as possible, and build an army of haters.

Where there’s a will, there’s a way. Excuses have an effective range of about zero meters. We all build the companies we want to build.

At least for now, it looks like Pinterest is on the right track. Everyone should take note.

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CEO-Read  –  Amazon.com  –  www.smroi.net  –  Barnes & Noble  –  Que

– #smROI is now available in English, German, Korean and Japanese.

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