Who Do You Trust, Facebook or GM?

If you are reading this, you know the details.  GM has come out and rained on the Facebook IPO Valuation Parade by saying they will stop advertising on Facebook, as GM does not see the value.  Not good.

Or is it?

GM?  Marketing genius?  Really? 

GM may be a lot of things, but a marketing juggernaut is not what comes to me top of mind for a firm who squandered their dominant market position through institutional arrogance, poor labor expense management, and some rather squirrely technology moves such as buying and spinning off EDS and sinking billions into automated Saturn plants.

Marketing juggernauts do not need government bail outs to survive. 

Now this excoriation of the Gang That Couldn’t Shoot Straight does not necessarily mean Facebook will be the next Microsoft, Apple, or IBM.  The current explosion on social valuations certainly smells a lot like the internet bubble that burst at the turn of the century, but this IT industry transformation has greater legs than that one.

Consider the following when trying to decide if Facebook will be a flash in the pan or not.

Consumerization of IT

I know.  It’s a shop worn phrase, but it happens to be very real.  We as consumers and office workers live on the internet through multiple devices.  Our time on the internet will not abate.  Hence we see industry valuation shifting to those who dominate the device space.  To wit: Apple.

Therefore it stands to reasons spots consumers access with those devices such as eBay, Amazon, Facebook, etc will come along for the valuation ride.  Whether or not it will implode remains to be seen.  There will be an influx of entrants, a run up, and a consolidation.  Facebook has a leadership position.  Then again, so have firms like Apollo Computer and Borland.

Google

Google sits pitted in a three way dog fight for device dominance with Apple and with Microsoft.  Microsoft sat here before against IBM when IBM sought to take back the device space with its OS/2 operating system. That was a classic David and Goliath struggle with Microsoft in the role of David.  Now, however, Microsoft is the Goliath and Google is the David.

And Google concerns itself far more with advertising revenue streams than it does with software license revenue streams.  And, as such, Google wants to track as much of our personal activity as possible.

And there could be backlash on that over time akin to consumers pushing back against telemarketing calls.  We will undoubtedly self select into groups or communities.  We will then “trust” that community to determine what ad reach outs flow to us.  Facebook has potential to serve that function.  Google certainly gets this as well given Google Circles, for example.

Zynga

Divorced, I had a facebook page I ran for my daughter 3 years ago when she was 10.  She liked Farmville, so I was sucked into the thing to harvest her crops on nights she was with her mother, and my brain had to do something or I might have hung myself with my belt out of the boredom.  Likewise, I was too cheap to slap down my credit card to buy gas for the tractor that would have made the task easier for me.  

NFW.  Principal.

So I started looking at the underlying analytics of the game.  I ran the numbers.  I did the math on the crop yields, boring my daughter to tears in what I hoped would be a fun exercise to hone math skills.  (Instead, I just got called Rain Man by the little darling.)  I imagined the operations behind the imaginary rat bastards selling me the seeds and housing kits at ridiculous prices.  I thought of operational linkages.

And it became clear to me there was a business in this stuff as I wrote in a blog in July of 2010:

“Playing it [Farmville from Zynga] fascinated me, too, from a business perspective.  The underlying analytics kept me enthralled pondering the possible push marketing that could come from it.  I understand the nature of the market information and data gleaned from choices, preferences, friends, and where we went through Farmville on the internet.”

So Zynga is onto something.  What do they know that General Motors does not?

Impulse Commerce

Folks buy cars infrequently.  A big ticket item, they take a lot of time and care in making the acquisition.  So it could well be that GM has this one right for THEIR product set, but few consumer product sets cost as much as a new car.  A recent snippet flew across my tweet feed showing that retail purchases have dropped considerably given the impact of on-line commerce.  Consumers hammered Best Buy through demonstrating product at Best Buy bricks and mortar outposts and then racing home to buy on price over the internet.  We will buy more over time through the internet given age maps closely to technological familiarity, and so as time progresses so, too, will this purchase preference.  

Conclusion

GM needs this press more than Facebook will be hurt by it.  It is partly the hype but it is also partly the nature of an automobile purchase cycle versus less expensive items such as clothing, books, videos, travel destinations and the like.

Consumer preferences do change rapidly however, as Yahoo!, AOL, and Compuserve can attest.  Technology enablement greatly speeds up the velocity of commerce and means the rise and fall of corporate entities in this social space will be breathtakingly fast.  Facebook admits it is not a mobile company, lacking the ability to push ads in that format today.  The cash they're amassing will certainly be funneled into determining a way to make (or rapidly acquire) capabilities in that arena.  

That said, I seriously question what in GM’s track record positions it to be a trusted advisor on social media investment decisions. 

If you do trust GM’s business acumen, then I bet they have a Spring Hill Manufacturing Plant they may want to try to sell you.