Wednesday, December 5, 2012

Tis' The Season to be Blue...

With the holiday season approaching, Internet companies are expecting a huge commercial push both from e-commerce sites, as well as content sites that drive revenue from their advertisements.  In the case of Facebook, they have traditionally fallen into the later camp.  This has traditionally allowed them to make comfortable profits, however they are coming to a crossroads where that strategy is being heavily challenged. 

As outlined in Robert Simon's Harvard Business Review article titled "Stress-Test Your Strategy", executive leader's must always review who the target customer is when shaping their strategy.  When Facebook started, that customer was its primary users, who were essential to Facebook's growth and adoption strategy.  Once that user base was large enough and established, Facebook's strategy changed as it looked to monetize its user base and reinvent itself as a social-advertising platform.  Finally, with Facebook's recent IPO, its new "customers" driving strategy have often shifted to its stockholders and the public marketplace.  While Facebook obviously now has several factions of "customers", it finding that its strategies (such as monetizing user's data) are often at odds with the wishes of each of those factions.

In an attempt to come up with a workable strategy that will appease advertisers, shareholders and users, Facebook recently has made a push to reinvent itself as an "e-commerce" site, in at least a partial sense.  The launch of Facebook Gifts will allow users to maintain "wish-lists", and also drive gift recommendations based on their social data.  This information can then be used to help the friends of users give gifts, not only for the holidays, but also for weddings, or birthdays (all of which are events that users already rely on Facebook for as a means of tracking and notification of these life-events).  This is clearly a strategic deviation for Facebook, however it may be exactly what it needs.

Facebook has chosen to pursue a "blue ocean" strategy by seeking out an undeserved aspect of the consumer marketplace.  Although there are plenty of e-commerce sites that sell items to be purchased as gifts, there are almost no stores that cater exclusively to gift givers and seekers.  When discussing "blue ocean" strategies, W. Chan Kim and Renee Mauborgne point out that successful strategic endeavors into new marketplaces are often made by "incumbents" who are capitalizing on their core competencies.  In Facebook's case, they already have a platform used to establish consumer's purchasing interests, and have established themselves as a prime place for users to communicate birthday and other life events to each other.

While it is still too early to tell if this strategic foray will succeed, it should still be noted that not every synergistic move such as the one attempted by Facebook has been successful.  It will take a fundamental change for Facebook to successfully reinvent itself as a place where uses go to "shop" instead of seek content.  As Paul B. Carroll and Chunka Mui point out in their essay "7 Ways to Fail Big", it is often the allure of these seemingly "synergistic" or "adjacency" moves into new marketplaces that can lead a successful company down a calamitous path.  


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