Facebook’s Looming “Want” Button and the Reality of Physical Logistics
Remember the dot.com and the dot.bomb? They were “so 11 years ago”, but they are still relevant.
Who won in the dot.com? Easy. Logistics companies. They experienced the largest physical industry expansion in human history and made national post offices obsolete. (Why would anyone limit a post office to a single nation in a world that flies product across borders in overnight shipments?)
Who lost? 90% of the easy-to-build electronic catalogs that forgot about the physical world in their stock market fueled fantasies of instant wealth.
Which electronic “social interfaces” survived? eBay sailed through the whole thing with a minor billion-dollar burp in the ill-fated purchase of Skype (now resting peacefully at Microsoft). eBay facilitated other people’s stuff – they never owned it.
Amazon lost money like crazy during the dot.com boom, but managed to pull off an amazing turnaround in late 2002 by shifting from electronic hype to completely new forms of physical logistics linked to customer software.
The other big winners were all in Asia, so they are mostly ignored by Americans, even though they handle the largest traffic in the world right now.
Who else lost? All the brick and mortar retailers. They were fond of saying that “e-commerce” was only 4% of sales, so it will remain a niche. They ignored the fact that every Christmas for years, online sales soared. They also ignored the completely unsustainable physical waste generated by huge brick buildings disgorging tons of inventory in post-season sales at pennies on the dollar.
I walked through a Kohl’s last week during a 40% off sale. I counted more than 30 clerks and 15 customers. They did not have my size in anything.
We Still Live in a Physical World
Most of us are addicted to texting and checking reality on Google, but we are fundamentally still physical organisms. The Maslow Hierarchy of Needs still dominates our world. Air, Water, Shelter, Food, Clothing all come before Facebook.
Facebook managed to talk investors out of billions of dollars with a “Like” button. But that has no real physicality; it’s just one more commodity advertising medium. So everyone is now wondering if Facebook has legs. It has more than a billion users, but those virtual friends can disappear just as quickly as Myspace (remember them?). Can Facebook walk, or only talk?
Facebook fans on Wall Street say wait for the “Want” button. Soon you can “Like” and “Want” at the same time. The assumption seems to be that once Facebookies want, they will buy, and Facebook will collect rents.
Maybe? But who executes this? Check it out. There is no back end to Facebook, it’s all face….and games….which are losing revenue (see Zynga).
Where do we find clues to the future of Facebook as physical commerce generator?
Amazon.
Why? Because Amazon right now has the most advanced facilitated logistics system on the planet. Amazon knows three things:
• Where’s the stuff? In its own warehouses and in thousands of “affiliate” stores, warehouses, and in the garages of many of us who sell our used waste on Amazon and eBay.
• Where’s the customer? Amazon gets your order and they know where you are within one meter, and – mathematically – how long you might wait for delivery.
• Where’s the nearest truck that can get the stuff to the customer the fastest and cheapest? Amazon computers can build a just-in-time single-item logistics pathway between “stuff” and “customer” and divert a truck to connect the dots to you within hours.
So What…For Facebook?
Facebook is all monetized hype. People pay for the soft stuff on the Maslow Hierarchy – “self actualization” (feeling good). That’s a viable business but it can disappear as quickly as an hour of speed dating.
If you are thinking about investing in Facebook, quickly look behind the pretty face for the trucks. How will the Want button connect to the trucks?
Want an interesting business model? Facebook Want button connects to Amazon’s complete just-in-time facilitated logistics system. Right now Amazon can handle millions of orders from small mom-and-pop retailers to your home. What would happen if Amazon got a flood of organized orders from Facebook?
Now that could talk and walk at the same time.
Marty Anderson
Senior Lecturer in Management