Since the smartphone first came out on the market, people have been filling their screens with dozens of new apps. On many phones, you can find Uber, Facebook and perhaps a few apps from banks and popular stores. WeChat, a messaging app created by Chinese company Tencent, combines all of them into one and is taking advantage of the growing mobile e-commerce market to move beyond providing simple messaging services. Released in just 2011, WeChat has grown to have over 806 million users and makes its counterparts, Facebook’s Messenger and WhatsApp look primitive in comparison.

WeChat sets itself apart by combining and innovating features of many other social media and e-commerce apps. Besides simple messaging, WeChat also allows users to video chat and call their contacts. Users can also post photos and status updates in the “Moments” section much similar to Facebook’s Newsfeed. Their contacts can then tag, comment or like each others posts. WeChat has also brilliantly streamlined the process of connecting to new people. Users simply scan personalized QR codes to connect with new contacts. At large functions, such as a parties or networking events, users can quickly connect with each other by using the “shake” or “radar” features that connect individuals to others in their immediate vicinity.

WeChat’s foray into e-commerce is what truly set them apart. In 2013, WeChat launched WeChat Wallet, an internal app feature that at first allowed users to send money to each other, similar to PayPal’s Venmo. Many Chinese users especially took advantage of the new feature during the holiday season. According to the Wall Street Journal, in 2016 Chinese users sent 32 billion “bundles” of cash during New Years alone. About a year after the start of WeChat Wallet, Tencent partnered with Didi, a taxi hailing app. WeChat users were then able to call and pay for a taxi all within the app. In its first month, over 21 million cab rides were ordered via WeChat according to TechInAsia. This service largely helped Didi push Uber out of the Chinese market.

Tencent’s partnership with Didi was WeChat’s first major advance in e-commerce. Shortly after, WeChat launched in-store payments. Tencent took advantage of the WeChat Wallet platform and QR codes already in the app to make in-store payments more seamless. Users would first link their credit cards with WeChat Wallet then have their QR code scanned when making a purchase at a store. According to the Financial Times, WeChat handled 21 percent of Chinese mobile payments in 2015, just a year after starting the service.

WeChat also allowed businesses to make their own accounts, similar to Pages on Facebook. As a result, consumers can browse, research and make purchases all within the app. According to Tencent, over 300,000 retail stores connect with customers on WeChat. Like eBay and Amazon, individuals can start accounts to sell their own products. Businesses like McDonalds and Starbucks use their WeChat pages to allow customers to find the nearest store and order products for pickup. Other companies such as Coca-Cola took more creative measures to increase direct customer interaction. WeChat users can play games in the app and then receive Coca-Cola coupons, which then go to their “wallet” for later use.

WeChat’s diverse range of features affords it a unique advantage: one-stop shopping. Unlike other apps such as Uber or Amazon that offer a narrow focus of features, WeChat allows users to carry out many activities in one place, making mobile phone use more user-friendly. The app’s efficiency has allowed it to grow to its current size in just half a decade while also bringing in high revenues for Tencent. According to the BBC, WeChat’s growth helped Tencent overtake the better-known Alibaba as China’s most valuable tech company in August 2016. Tencent was valued at $249 billion, $3 billion more than Alibaba.

Another advantage of WeChat’s “one-stop-shopping” characteristic is that it can holistically look at users’ habits, unlike other apps that can only collect users’ habits in specific areas. This means that Tencent has the data to potentially analyze consumer markets more efficiently than other companies. The data collected from WeChat itself could also be a significant profit maker for Tencent.

With a strong user base in China, WeChat has turned its attention to foreign markets, most notably in South Africa and South Korea. In many foreign countries, more people use phones than computers. Therefore, the future of e-commerce will depend on mobile e-commerce growth. According to Gartner, a technology researching company, consumers will spend $2 billion on online shopping through their mobile devices by the end of 2016. Social media and messaging apps, especially Facebook’s Messenger, are losing out on what could potentially be billions of dollars in revenue. According to Forbes, in the first quarter of 2016, WeChat brought in $1.8 billion in mobile revenue. In contrast, Facebook’s Messenger brought in zero. WeChat’s potential to become a major player in overseas markets will increase as mobile e-commerce grows, despite the company’s moderate success abroad. Apps like Messenger need to innovate and go beyond simple messaging — otherwise many more people will be scanning each other’s QR codes than friending each other.

Do you remember when Myspace was the king of social networks? Launched in 2003, Myspace dominated the online social sphere from 2005 until 2008 when Mark Zuckerberg’s Facebook made it obsolete. Facebook gained popularity so quickly that by August 2008 it had over one million active monthly users. Now, Facebook has more than 1.32 billion monthly active users. However, like all products, Facebook too has slowed in growth. The social network makes enormous amounts of money by selling users’ data to third parties and by selling advertising space. Although Facebook is constantly evolving, many users are now becoming concerned about their privacy. Facebook began as ad-free, but then quickly changed its privacy policies in order to gather and sell users’ data to advertisers. In contrast, Ello began as a private social network, but due to high demand is going public. Many attribute this high demand to its unconventional privacy policies that users realized were very important to them.

Ello, founded by Paul Budnitz and a team of six other artists and programmers in March of 2014, is described by many as being a sort of “anti-Facebook.” The small team consists of Budnitz, who came up with the idea for Ello, Todd Berger and Lucian Föhr, two well-known graphic designers from Colorado and three programmers, Gabe Varela, Matthew Kitt, Jay Zeschin and Justin Gitlin. The main features of Ello are complete privacy and no advertisements or data collection. Ello only gathers site usage statistics that it compiles so as to ensure that the data cannot be tracked back to any individual user. If one really wants too, Ello even allows individual users to opt of this tracking if they so wish. The layout of the website is stylistically very clean and simple, and the social network is still in beta mode which means that users can only join by invite.

Despite being so young, Ello has been drawing a lot of publicity. Awareness about Ello exploded in September 2014 due to LGBTQ+ issues that Facebook ran into. Facebook requires that users use their real names which some argued would exclude drag queens from the social network.  As a result, Ello began to see record invite requests, which reached a peak of 35,000 requests per hour in late September. Invites became so coveted that some people were able to sell their invites on Ebay for around $500. With no advertisements, complete privacy and such high initial demand, it is not difficult to see why some think Ello could trump Facebook. In order to topple the king of social networks however, Ello will need to overcome many challenges.

Some of the most stringent criticism Ello has received address the design of their website. Although it is very clean with lots of whitespace, many complain that the user interface is not very intuitive. There is only one omnibar which acts as a multi purpose tool, serving all at once as a place to post, search content, send messages and tag people in posts. While some find this useful, many others find it very confusing. Typing “@” will tag someone in a post while typing “@@” sends a private message. Additionally, since Ello is still in beta mode, there are many glitches and bugs. This is partially due to the tiny team that currently manages the social network and also partially due to interface specialization. The trick is to make a social network unique enough to offer a differentiated product that will draw users away from the big players such as Facebook and Twitter while being similar enough to make the transition smooth and effortless to these same users.

Finally, Ello lacks a business model that outlines a cohesive plan as to how they will ultimately generate cash flow and revenue. Facebook makes money by selling advertisements and data collected from its users. Since Ello’s selling point hinges on its promises to never have ads or track users, how exactly will it generate revenue?  The company was funded by an initial investment from a venture capital firm that will certainly be expecting  returns. Initial critics had thus hypothesized that the future would force Ello founders to face a stark dichotomy: bail on their values of privacy and no advertisements or go bankrupt. However, on October 23, 2014, Ello officially became a USA Public Benefit Corporation (PBC). A PBC is defined as “a special for-profit company” that operates to produce a benefit for society as a whole. As a PBC, Ello is legally obligated to take into consideration its impact on society in every decision it makes. The agreement codified a set of rules that effectively prohibits Ello from ever selling user data or displaying paid advertising. Instead, in order to generate revenue, founder Paul Budnitz claims that Ello is looking into a “freemium” model in which users would pay a small amount for extra features. This however remains very vague and would most likely not be able to deliver substantial returns. Since hosting and monitoring a social network requires vast amounts of financial and human capital resources, even just to stay afloat, Ello will have to figure out a way  to cover its costs and pay its employees.

Finally, Ello will be facing a steep upward battle against Facebook who has the first-move advantage. Facebook already dominates the social scene and has recently acquired several new companies such as Instagram, which gives it a huge amalgamation of power. It is very well refined, and offers many more features than just posting information (games, apps etc.) Facebook thus benefits from vast economies of scale as well as network effects. The point of a social network is to connect with a wide range of people and Facebook’s staggering 1.23 billion monthly users make it a powerful force to contend with. By comparison Ello has only a little over one million users, of which only 36 percent have yet posted. Of those, only 27 percent have posted more than three times. Thus, Ello, with its strong emphasis on customer privacy, has introduced an interesting new value proposition. However it is clear that it faces many challenges. Ultimately time will tell whether Ello has a chance at success or if it will fail like so many other social networks before it.

 

 

 

The growth of Facebook has often been associated with the increasing connectivity of people all over the world, bringing into contact those who could never before be part of the same network. New York Times columnist Thomas Friedman views the rise of social media as a factor in the shaping of a “bottom-up” world whereby individuals have more power than ever to enact change. Yet for all its global functions, Facebook’s universality also has a powerful force at the most local level: it can foster community between small-town stores and their customers. In fact, behind the entertainment industry, local entities rank #2 in terms of Facebook users’ engagement.

In Hanover, look no further than the wildly popular Morano Gelato to see how Facebook’s marketing potential can be deployed even in such a small town. On its Facebook page, owner Morgan Morano has posted its available flavors for certain days, and held sweepstakes to draw them in—for example, “like” this page for a chance to win free gelato for a month. It’s likely that the winner will bring friends and post their victory as their own Facebook status, creating a ripple effect to attract even more customers. In the future, Morano is considering a sweepstakes that encourages followers to vote on a flavor they’d like to see, with ten participants getting it for free.

These tactics are fundamentally about building a more personal relationship with customers. Morano has heard people tell her that they saw today’s flavor on the Facebook page and just had to come in. Her Facebook posts are a reminder that even in the frigid cold, you can still have access to a dessert that is usually considered a summertime treat. It is, of course, difficult to quantify how marketing directly translates into further foot traffic, which explains the rationale for the more intangible goal of enhancing local people’s intimate connection to Morano Gelato.

Morano Gelato, which has emerged as the go-to place on Main Street, began in 2010 merely as a stand at the annual summer Hanover Farmers’ Market on the Dartmouth green, where Morgan—a Long Island, NY native whose mother now lives in the Upper Valley—sold her gelato to eager Dartmouth students and others. The next month she rented a spot in the back of a café in town, and then moved to the shop’s current location on Main Street.

Morano had never before done any advertising, relying instead on word of mouth in a town where it was nearly impossible to not know what or where Morano Gelato was. The new emphasis on Facebook marketing was spawned by Sebastian De Luca ’14, founder of PromoteU, which equips small businesses with digital marketing skills. De Luca has been designing many of Morano’s Facebook posts and sweepstakes, and has been collecting data on which people are engaged in the group’s Facebook page.

De Luca is looking to harness the computer-savvy abilities of college students to make social marketing more accessible and affordable for small businesses. As so many young people possess an understanding of these new technologies, there’s a less of a need for professionals within consulting companies. Instead, business owners can turn to college students who can work for much lower pay than expert consultants, in the same way that students can offer their SAT tutoring services for a much more affordable price than a private company.

PromoteU’s focus is on building the capacity of business owners to manage their own social media tools, departing from many firms’ approach of taking control of these tools. The key, De Luca says, is to reduce the cost- and time-efficiency of marketing. That’s why he connects them with the existing, least costly outlets such as Facebook and Twitter. And teaching them how to use these services effectively reduces the amount of time they have to spend on advertising efforts.

As Facebook has seemingly made us more connected than ever, we must also wonder whether it’s coming at the expense of more meaningful personal interactions and of our sense of community. Yet what Morano Gelato shows is that Facebook may indeed be a powerful force for strengthening bonds in local communities.

On April 12th, Facebook acquired the well-known app company Instagram for approximately $1 billion. The pricing may be bewildering to some; after all, how could a company with just one free smartphone app and 13 employees of negligible value sell for the same price as a small island nation? The app’s functions, while clever, are nothing that Facebook couldn’t recreate for a small fraction of the acquisition cost — Instagram simply allows users to take photos from their smartphones and applies various digital filters in order to give them a vintage feel, modifying them in the style of old Polaroid cameras. The result is photos with a distinct vintage feel to them that can then be shared to various social networks. The app was a breath of fresh air for users (read: hipsters) who wanted that old- school feel to their pictures without having to lug around a bulky analog camera. From a functionality standpoint, that’s all the company offers. Any decent programming team could produce (and have produced) almost identical apps.

However, this train of thought misses the point. The lack of proprietary value in the app belies the true value of this deal to Facebook: the network of people that Instagram can bring to the social networking giant.

Instagram has over 30 million registered accounts, representing a vast network of mobile users that represents huge potential for a social network like Facebook. This number should continue to soar as Instagram only recently began expanding beyond iOS devices (the Apple lineup of mobile electronics including the iPhone, iPad, and iPod Touch) to the most popular smartphone operating system in the world, Android. The app was downloaded over one million times in the first 12 hours it appeared on the iOS alternative, representing the eager user base for the app. Despite the staggering number of users, Instagram has made no revenue to date, leading many to say that is has no business model at all. In other words, with nothing proprietary, no real future hope for revenue, and only popularity and polish to its name, Instagram is worth $1 billion for its loyal mobile users alone.

In Facebook’s eyes, what users actually do with the app is irrelevant, so long as it gives them access to users they could not reach before. Facebook’s own business model is dependent on getting as many users as possible using the site as much as possible, and one place it has not been able to do so is in the mobile app area. Facebook not only gets revenue through users clicking on ads of relevance to them, but by analyzing the preferences of its users, it can give each user the ad they are most likely to click on–thereby maximizing ad revenue.

Instagram not only adds another way to profile users, but it also adds a brand new network to Facebook’s massive web. Facebook has a mobile app for its social network, but amidst poor reviews has not found a great increase in traffic from it. Instagram’s users are exclusively mobile, and the social network simply wants to change that network of Instagram users into new mobile Facebook users. In a statement regarding the purchase, the company emphasized the importance of mobile usage, calling it “critical to maintaining growth and engagement over the long term”. Ultimately, this is not a purchase of an app, or some employees, but an acquisition of users, which is well worth it to a modern internet company like Facebook.

The Instagram acquisition represents an industry-wide trend of buying companies to capture their network despite their apparent lack of a business plan. Companies like Groupon, Pandora, LinkedIn, and Yelp all attract investments valuing them at hundreds of millions, largely for the users they bring to their investor. Each of these companies stakes its future on all its users having intrinsic monetary value, and assumes that they will inevitably make money off of them through advertising. With the power of advertising that tracks users’ preferences, capturing networks may end up being the key to capturing the riches on the Internet…or it could end up being fool’s gold. That user base may represent incredible potential profit, but it seems increasingly dubious that the valuation of these companies is reflected in their sky-high stock prices.

Such was the problem of the Web 1.0 bubble, where popular companies with no real earnings potential were gobbled up by investors and failed spectacularly. Could we be seeing the new Web 2.0 bubble, a severe overvaluation of the networks of companies doomed to failure? Or is Facebook slowly consolidating users to the point where they will be a financial success until the end of time?

Either way, we are entering an era where the people that follow a company are far more valuable than the company itself.