Mad Dog 21/21: Transit Of Venues

The world of wankerware: Did you think Facebook was the number one social networking venue despite a slapstick $100 billion IPO? That Twitter was a big hitter? That Google+ was looking up? That LinkedIn was how business people passed the word? That Foursquare was hot hot hot hot? That Yammer went for a billion under the hammer? So how can IDC say that IBM is number one in social platforms, taking in a piddling $60 million in 2010?

Well, if you are rich, delusional IBM, then you can play at social media and still live in your own untethered world.

It’s not surprising that IBM’s infatuation with social media shows its failure to grasp what is going on around. IBM has often missed or misunderstood major trends in information technology, only to catch on and catch up later.

This was the case with minicomputers, the platforms that died giving birth to Unix. Initially, IBM was hopelessly out of touch with developments inside Bell Labs and DEC, but today Big Blue is a powerful force in Linux and a generous participant in the open source community. Its Power Systems servers, arguably today’s minicomputers, constitute an engine for IBM’s growth. Nevertheless, the continued evolution of interactive technologies that has led to the prominence of smartphones and tablet clients remains very difficult for IBM to understand let alone exploit, at least in its executive suite.

IBM has a top down culture. Interactive computing is alien to the IBM way of thinking. IBM has struggled whenever coping with reactive systems from the days of the minicomputer to the emerging Internet of things. This may seem odd to anyone who observes how attentive IBM can be to its customers and how well it can react and adjust to marketplace phenomena, notwithstanding its bulk. But while IBM itself might be an effective social medium, the goods and services it offers don’t mirror the conduct of its sales personnel (and the front line people at its resellers). IBM’s systems mirror the dreams and fantasies of its emperors, who have always succeeded only in market segments where they can gain control, not the ones where they must really compete or share glory.

This failure to connect with customers wouldn’t be so severely limiting if the people in IBM’s upper echelons could catch the attention of the consuming public. Steve Jobs was hardly a man of the people. But he was a prominent figure in the unfolding contemporary culture, a leader who might not have understood his admirers but who knew when he was being followed and how to change whenever he realized he was shouting into the wind.

IBM has not had a charismatic boss in a long time. Founder Thomas Watson was said to have been a pretty inspiring leader, but after his tenure even the most highly revered of its chieftains, such as Lou Gerstner, were not very persuasive when it came to reshaping the computer industry or commercial society at large. But IBM did great under Gerstner anyway. While IBM might benefit from having a CEO with the star quality of a Steve Jobs, its record shows that it doesn’t really need a uniquely influential leader in order to succeed. It just needs to give good guidance (and good products) to its sales force.

Still, IBM could benefit from being a little more aware of the world outside its customer base and the army of consultants that feed off its droppings like birds following a circus parade. IBM is ill served by posting reports asserting its mastery of the social networking medium, such as the one by IDC that it touts on its website, when everyone (except, perhaps, the people in Armonk), knows IBM is struggling to cope with the lightning fast evolution of information technology.

IBM doesn’t seem to realize that there’s no shame in failing to understand just how social networks might help or fail to help business. Nobody really seems to have a good grip on the situation. Everyone in the world knows social networking is very popular right now. But nobody has monetized social linkages the way Google and others have turned web searches into cash fountains. Quite a few social networking companies are getting huge attention, but it’s mainly for their attention, not their results.

Even the smartest investors in the room, the big names on Wall Street, showed their hubris and ignorance during the Facebook IPO. They poured billions into Facebook, but they still can’t say whether it has a valid business model. It might turn out that Facebook and its ilk will follow the course of MySpace, the first really popular social networking service, on a dramatic ride to oblivion.

A lot of investors are already quite nervous. Facebook had a pratfall of an IPO, coming out at a corporate valuation of $104 billion and quickly falling below $71 billion. (It has rebounded a bit to $82 billion as we go to press on Friday.)

If one wanted an example company to compare to Facebook, there’s a very important one called MySpace. You might recall that this was really the first big social network. It was bought up by News Corp for more than $500 million. News Corp is a company that’s not at the top of too many lists when it comes to making friends, but it ranks high at influencing people. Anyway, after wasting hundreds of millions of dollars, News Corp gave up and unloaded the property. Eventually it ended up in the hands of a company associated with pop entertainer Justin Timberlake, which reportedly bought the ailing outfit for about $35 million, peanuts compared to the huge amount of cash News Corp poured into the social sinker.

IBM hasn’t made that kind of a mistake in social media, for which its shareholders should be grateful. But IBM is a real company, not a family firm that metastasized.

What News Corp and IBM missed might be Pinterest, which offers a mix of social networking and shopping. It has grown very popular and it looks like it will be easy to monetize, at least compared to Facebook. If Facebook start imitating Pinterest, that might be a boost for P and a sign of imminent demise for F. If IBM had to hitch its social networking wagon to one outfit right now, Pinterest, not Facebook, would make the most sense. But IBM doesn’t look like it’s ready to make any serious moves into social networking. It is nowhere near current, let alone at the leading edge of this fast-moving development.

Last year, IBM backed a report from IDC that purported to sketch out the social media, or at least the main social platform of interest to business. IDC’s list missed most of the outfits that are now in the headlines for good reasons or bad. IBM might have been better off checking out the list on Wikipedia. The IDC list does not include Facebook, which is mainly personal but, as an advertising medium, even without a well-regarded business model, is still potentially of great importance to business. A billion users might be wrong, but they still have nearly two billion armpits waiting to buy deodorant.

No matter what IDC said in its report for IBM, LinkedIn probably leads the business side of social networking. But despite its technical prowess, and roster of reputedly smart backers, it is as vulnerable as any other creature of the Internet. In fact, LinkedIn was recently made famous by its loss to hackers of 6,500,000 users’ passwords. Nobody really knows just how severe the consequences of this incident might be, but lots of people use the same passwords for multiple purposes and, to make matters worse, the LinkedIn login name of a LinkedIn user turns out to be his email address, a too-common type of user name. So right away the hacked accounts have a big problem. The problem could be bigger if it touched on financial institutions, but banks are generally smarter than LinkedIn and make their customers pick user names that are not their email addresses. Still, an awful lot of websites where users buy things probably have logins that match the ones on LinkedIn. And LinkedIn is not alone. Twitter, another hugely popular social service, has security headaches, too.

Somewhere behind LinkedIn when it comes to social networking for business there’s an outfit called Yammer, which may soon be part of Microsoft. The story anticipating the acquisition pegged the price of Yammer at $1 billion. That is way more than the total size of the social networking outfits in IDC’s list. (You can’t count some of IDC’s entries, like Cisco, that might have a toe in the water but are not companies whose main offering is social networking.) And there are others, more of them every day.

Still, one of the real challenges faced by social networking and by out-of-touch companies like IBM that think mobile is a sure thing mantra is the observation, recently expressed with his usual excitability by Jean-Louis Gassée, that the widely imagined mobile monetization opportunity is mostly bunk. Gassée may be a card-carrying curmudgeon, but he’s been right about things at least as often as he’s been wrong. And he’s always unafraid to challenge orthodoxies. He is exactly the kind of gadfly IBM ought to have on its roster of advisers, or list of Facebook Friends, or band of Tweet Followers. Some kind of deal would be good for Gassée, too. It’s about time he actually did some hard work. And we can’t think of any job that’s harder than getting Ginni Rometty in tune with the twenty-something disposable income crowd that makes social media investors believe there’s a gold mine in it somewhere, somehow.

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