In case you didn’t notice, social media is transforming life as we know it. The old laws of business, supply and demand, and even gravity, no longer apply.
In the world of business, our longstanding adherence to something we call GAAP (Generally Accepted Accounting Principles) is giving way to SMAAP (Social Media Accepted Accounting Principles). A pioneer in this new world of accounting is Groupon. According to the New York Times, the firm has developed the ACSOI metric:
“Short for adjusted consolidated segment operating income, Acsoi is a yardstick that Groupon recommends investors use to determine how it is performing. It is essentially operating profit minus the company’s online marketing and acquisition expenses — a highly nonstandard approach that has many scratching their heads.”
My take: A brilliant idea. And there’s no reason why Groupon — or any other start-up looking to capitalize on the social media bubble — should stop at that metric.
Here are my suggestions for new metrics for the social media bubble:
1. Temporarily Unconverted Revenue from Fans (TURF)
During the Dot Com boom, many start-ups focused on “eyeballs” — i.e., how many site visitors they got during a reporting period. The problem, they discovered, was that eyeballs didn’t equal revenue, and this hurt their ability to maintain their initially high valuations.
SMubbles (social media bubble start-ups) need not let this happen to them. They should encourage investors to focus on a metric called TURF — temporarily unconverted revenue from fans. There’s simply no reason why a SMubble should have to rely on real and realized revenue when proving its value to the market.
The question, of course, is how much does that Facebook fan represent in unrealized revenue? Adweek says $3.60. Sound’s good to me. Let’s move on to the next metric.
2. Cumulative Revenue to Periodic Expense Ratio (CRePE Ratio).
Under the ancient GAAP method of accounting, profitability is calculated by comparing revenue to expenses for a given reporting period.
For a SMubble, this form of accounting can be detrimental to its valuation if expenses are rising faster than revenue (e.g., in periods when TURF is rising, called TURFing).
Instead, a SMubble should report profitability by using the CRePE Ratio — its cumulative revenue over the course of the year divided by the current period’s expense.
Here’s how it works:
Let’s say a SMubble brings in $1 million a quarter and spends $2 million per quarter. Under GAAP (Grievously Archaic Accounting Principles), that SMubble would be operating unprofitably. But using the CRePE Ratio, in the 2rd quarter of the year it would break even, and show a profit in Q3! Hooray for the CRePE Ratio!
3. Earnings Before Interest, Taxes, and Expenses (EBITEX).
SMubbles who generate no revenue during a particular reporting period won’t like the CRePE Ratio if expenses increase from the last period to the current one.
Their measure of profitability should be EBITEX — Earnings before interest, taxes, and expenses.
In the age of social media, there’s simply no reason to let something like operating expenses bring down your profits, and get in the way of a high valuation.
(h/t to @AtomicTango for alerting me to the NYTimes article)
I came across a blog post recently that contained the following:
“My boss Gordon told me an interesting story. His 22-year-old son was having an issue with his bank, and didn’t know how to solve the problem. Gordon said, “Well, if you’re not getting an answer online, why don’t you drive over to the bank branch and talk to someone in person?” His son didn’t know where his bank was located—and didn’t even realize the bank even had physical locations. This response is very representative of Gen Y.”
My take: God help us. If Gen Yers really don’t know that their bank has branches, let alone where those branches are located, we’re doomed as a society.
I also can’t help but wonder if Gordon’s son knew that he could use his smartphone — which is what he might have been using to access his bank account online — to actually CALL the bank and talk to someone. It’s a real shame that some Gen Yers are using so little of the capabilities that their smartphones offer.
A while back, I did my part for social media hygiene and health by identifying four social media syndromes: Attention deficit disorder, Twitterhea, Redactile dysfunction, and Irritable blog syndrome.
I’m saddened to announce that my scientific research has uncovered a new social media disease: Infographaritis.
Sufferers from this affliction are easy to spot: They have an unhealthy infatuation with infographics.
A good infographic is a work of art. It’s visually pleasing and informative. It engages the viewer and is intuitive.
The problem is that there are few really good infographic artists out there.
But the fact that a good infographic requires its creator to have good data and design skills is of no concern with those afflicted by Infographaritis.
Believe me when I say that the last thing I want to do here is name names and call out the folks with this sickness. But in the interest of social media public health and safety, I’m afraid I’m going to have to do just that.
Exhibit #1: The Real Cost of Social Media. Folks, listen up: Simply slapping a bunch of numbers in a graphic and varying the chart styles does not make for a good infographic. What’s even worse, the Infrographaritis sufferer that put this one together isn’t even in the ballpark of coming up with credible estimates for the costs and benefits of social media.
Exhibit #2: The Five Types of Annoying Facebook Users. There’s a lot wrong with this infographic. First and foremost: There’s no information. It’s called INFOgraphic for a reason, no? Another problem: There aren’t five types of annoying Facebook users — it’s more like 500.
I could go and on with examples of Infographaritis sufferers. If you feel a case of Infographaritis coming on, then please — PLEASE — go take a cold shower or something until it passes.
I get a little tired of listening to Gen Yers blame my generation (Boomers) for all of life’s ills and woes, when I know for a fact that the problems have been around for ages (even though I tell the Gen Yers that the Democrats are to blame).
But there is one thing that, in all fairness, I think can be blamed on Boomers: The excessive use of the F-word in the business world.
Using the F-word in a business situation used to be unacceptable. But increasingly throughout the 90s and first decade of the new century, not only did more and more business people use the F-word, but authors of management articles and books began writing about it.
The icing on the cake — or perhaps it’s the straw that broke the camel’s back — is the April 2010 issue of the Harvard Business Review which was entirely dedicated to the F-word.
And thus, once taboo to use in the workplace, this simple 7-letter word is now an accepted part of the jargon.
Pardon? Yes, I did say 7-letter word. What are you talking about? I’m talking about FAILURE.
Somehow or other, in the past 20 years or so, it’s become acceptable — if not fashionable — to fail.
In the HBR issue, there’s one article titled “Strategies for Learning from Failure,” and another titled “Failing By Design.” An interview with P&G’s former CEO quotes him as saying “I think of my failures as a gift.”
What a load of crap. This celebration of failure is born out of the mentality that awards every one a trophy for “trying.”
In business, we reward people who succeed. In my Shevlin Business Review, the articles will be titled “Strategies for Learning How To Repeat Your Successes” and “Succeeding By Design.” The quote from the interview with me will read: “I think of my failures as….well, f**king failures.”
Part of the problem with this ridiculous obsession with failure is that there is no easy way to define or recognize a failure.
For example, it’s often stated that some really high percentage of CRM implementations “fail.” What does that mean? That the project didn’t produce the intended return on investment? Is that the fault of the project, or the fault of the person who mis-estimated the ROI?
Did the effort produce nothing or has it just not produced something?
If the effort been producing nothing, has no one thought to alter the tactics and course of the initiative?
In other words, at what point do you decide that something has been a “failure”? [Please note that in Boomer Political Correctness school, I was taught to never call anyone a failure].
We can simply avoid the whole topic of “failure” by categorizing every initiative as an “experiment.” That way, if it “fails”, our butts are covered.
The design consultancy IDEO has been credited with coining the phrase “fail often in order to succeed sooner.”
There’s some stupidity for you.
It’s like thinking that the more times you flip a coin and it comes up heads, the closer you are to getting a tails. The odds are the same on every flip, folks. Failing 10 times in a row doesn’t increase the odds of success on the 11th try.
I shouldn’t be complaining about this, though. This obsession with the F-word might produce a new segment of the consulting industry: Failure consultants. Consultants who will help you fail.
I could be good at that.
I noticed a very disturbing trend this week regarding the top tweets: References to body parts. This is probably something that I just need to deal with, but references to certain parts of the body strike me as inappropriate for tweeting. But hey, I’m the guy who’s bugged by tweets about what you had for breakfast or a play-by-play account of your plane delay.
[Please note that I haven’t ranked this week’s Top 5 Tweets. Was hoping that y’all would vote on them to determine the top tweets. So the list is in chronological order, and not ranked. Please vote at the end of this post.]
@chrisgiles: You can’t spell “analyze” without “anal”.
As a Senior ANALyst for a leading ANALyst firm, thanks so much for that observation, Chris.
@michelleheath: Stressed. Took a moment to put on lipgloss. Feel much less stressed. What do u do when you’re stressed to de-stress?
Prozac in a lip gloss dispenser. What will they think of next?
@senigri: Love NYC in the Spring. Working from park -chess game on one side, bum picking toes on the other side…Ready to make some sales calls
We all do different things to psych ourselves up for big meetings and events. Remember the episode of The Office where Jim and Dwight go on a sales call, and Dwight is in the back seat playing air guitar to some heavy metal music and punching the back of the driver’s seat before going in to the call? That’s not nearly as motivational as watching bums pick their toes.
@elwoodicious: My kid picking her nose plucks a booger out and proudly declares, “I found gold, dad.”
What, no picture?
@RockyHunter: I seriously think I just saw a woman with a butt implant. There is no way that was real.
Pictures, people, pictures. I know you’re tweeting from your smartphone, there’s no reason why you can’t tweet the picture. Rocky might be on to something here. I haven’t listened to Howard Stern in a while, so I don’t know if he still does this routine or not, but he used to do a segment called Real or Fake? where he would…I don’t really have to describe this to you, do I? Maybe Rocky could do a segment on real/fake butts. Go for it, dude.
@sharistorm: My original post had ‘wonder bra’ as the #2 best invention in my lifetime but I toned it down for work. Ladies?
Hey, Shari: The question was “what is the best invention of your lifetime?” not “what is Canada’s greatest contribution to modern civilization?”
For a while now, I’ve been meaning to keep track of the tweets that just really make my day. I did it this week, but probably will get too lazy to do it again. But for the week of April 24th, here are my top 5 tweets of the week:
5) @dolce001: aite cipher group innit.babu damuwa i cld stat 4rm somwhere ROME waznt built in a day”LMAO dnt wory I wl fix u sumwhr
Since I work for Aite Group, I have a search column set up for “Aite Group” in Tweetdeck. Aite means partner or counterpart in Japanese. It also has some slang meaning, so as a result, I see tweets show up in Tweetdeck from people that I don’t follow (and am not very likely to). If you have ANY IDEA what this tweet is supposed be saying, please let me know. On second thought, don’t.
4) @victoriablogger: RT@factchimp Eating dandelions can make you urinate more.
C’mon, admit it. It’s tweets like these that make you realize how truly valuable Twitter is.
3) @aden_76: Thighs aching, lungs burning. All worth it. http://instagr.am/p/Dmc9i/
It’s bad enough that people tweet the play-by-play of their airplane delays, or what they had for breakfast. Now I have to endure tweets from my Twitter buddies about when they have sex. Oh, and since I know you’re wondering: No, I did NOT click on the picture.
2) @priteshpatel9: Oh yeeeeeeesssss!!!!! Two Krispy Kreme dog-nuts left in the fridge!
This just goes to prove that if you pay attention on Twitter, you can learn something new every day. On the day of this tweet, I learned TWO new things. First, I never knew that Krispy Kreme sold dog nuts. Second, it had never occurred to me before to keep my dog’s nuts in the refrigerator.
And the #1 tweet of the week….
1) @Jimmy Marks: Bear and Rabbit are pooping in the woods. Bear: “Does poo stick to your fur?” Rabbit: “No”. So the bear wipes his butt with the rabbit.
I realize that there are a number of tools already on the market that purport to measure your social media, or Twitter, influence. But I’m pretty sure I can do a better job of measuring this than they can.
Allow me to introduce a new social media influence measurement tool: The Potemkin Score.
First, a little about the name. According to Wikipedia:
Potemkin villages is an idiom based on a historical myth. According to the myth, there were fake settlements purportedly erected at the direction of Russian minister Grigory Potyomkin to fool Empress Catherine II during her visit to Crimea in 1787. Potyomkin had hollow facades of villages constructed along the desolate banks of the Dnieper River in order to impress the monarch and her travel party with the value of her new conquests, thus enhancing his standing in the empress’ eyes.
In his book Proofiness, author Charles Seife extends this concept to what he calls Potemkin numbers — phony statistics based on erroneous or nonexistent calculations. For example: Justice Antonin Scalia’s assertion that only 0.027 percent of convicted felons are wrongly imprisoned was a Potemkin number derived from a prosecutor’s back-of-the-envelope estimate; more careful studies suggest the rate might be between 3 and 5 percent.
Statistics from Klout or Twitter Grader are nothing but Potemkin numbers. Fancy calculations that purport to measure one’s influence. Dictionary.com defines influence as “the capacity or power of persons or things to be a compelling force on or produce effects on the actions, behavior, opinions, etc., of others.” In this context measuring someone’s Twitter influence is impossible, or at least as Klout and Twitter Grader do it, seriously misguided.
The first problem is that these current scoring mechanisms have a limited view of the actions being taken as a result of someone’s purported influence. Second, they have absolutely no insight into opinions.
Measuring influence has been a marketing challenge for years — ask anyone who has tried to attribute the impact of advertising or direct marketing campaigns on sales.
But that’s no problem for the likes of Klout and Twitter Grader.
For example, after just two weeks of tweeting, @CharlieSheen has a Klout score of 94 and a Twitter Grader score of 100. Yes, @CharlieSheen has a lot of followers, and yes, we hang on every word he tweets to see how far he can stick his foot down his mouth. But this is not — let me repeat, NOT — influence.
So I have constructed a new measure of social media influence: The Potemkin Score (no point in trying to disguise what it really is).
There are two steps in calculating your Potemkin score:
1. (Klout score + Twitter Grader score + Twitalyzer score) / 3
2. Multiply the number you get in Step #1 by your Influence Importance score. The score ranges from 0 to 100. To give you some guidelines on determining your score:
0 = I don’t give a rat’s ass about my social media influence score
50 = My social media influence score is important to me
100 = I absolutely, positively have to have a high social media influence score, and will do everything within my power to ensure that I have a high social media influence score.
Allow me to help you analyze your Potemkin score:
1: Congratulations, you’re a normal, well-functioning human being. Well, in social media, at least. In real life, you might be a demented psychopath, but you’re doing a great job of hiding that in your social media interactions. Unless, of course, you’re lying about your Influence Importance score.
2: It really doesn’t matter what I say about this group. There are only about 3 or 4 people in the world who have a really high score on the left axis and a low Influence Importance score — Oprah, Justin Bieber, Dalai Lama. And they’re not reading this blog post.
3: You have no life. Your compulsion with your social media influence and the steps you’re taking to get high Klout and Twitter Grader scores demonstrates a sickness and delusion about what’s really important in this world.
4: Your first name is Lou. I’m just not sure if your last name is Nee or Zer.
I really don’t care if you read this list or like this list. It isn’t for you. It’s simply out there so I can remember what the hell it is I want to accomplish in 2011. Well, accomplish is too strong a word. But it’s my resolutions for 2011. Screw Andy Janning, I am going to try to improve myself in 2011.
Here are my resolutions for 2011, and they’re all about being a “pro” in 2011:
1. Be more proactive. About business opportunities, about connecting with people, with everything. Less reactive, more proactive.
2. Be more productive. I will multitask less, and get more done in 2011.
Now to be perfectly honest, the first two were easy to come up with. I knew I had to improve on those things. But to force-fit other resolutions into the completely corny, artificial, and useless “pro” construct I’ve set up for myself, I had to search for other words that begin with “pro.”
I decided to leave profuse and profane off the list (I’m already pretty good at that, if I say so myself). Proficient? Nah. Professorial? Hell no. Professional and profitable are outcomes — they should come as result of delivering on my resolutions. Progressive? Too late for that. Prolegomenous? I’m doing that right now. Promotable? That’s something you are as a result of doing other things (and I gave up on that a long time ago). Prophetic? Ugh. Prolific? Same as productive. Profligate? See #2 above. After some word- and soul- searching, I came up with my third resolution:
3. Eat more prosciutto. OK, so I’m setting the bar kind of low here. But I figure that first off, I’ll enjoy trying to fulfill this resolution, and second, I really think I can deliver on this one. Haven’t been able to deliver on the first two in 25 years in the work force, not sure what delusion is overcoming me now into thinking I’ll accomplish them in 2011.
Thanks for reading in 2010. Have a good New Year’s.