Facebook Marketing: Should You Use It?

Veritasium concludes that advertising your page on Facebook is a waste of money

VERITASIUM is a popular educational science channel on YouTube, created by Derek Muller, which tries to uncover misconceptions about science.

While not technically “science”, Veritasium has released an interesting and insightful video about the worth of Facebook marketing. In short, Facebook marketing appears to be a waste of money.

Muller provides evidence that the overwhelming share of Facebook likes are fake. He paid Facebook to promote Veritasium’s page, and got more likes. However, he also found that around 75% of new likes came from Egypt, India, The Philippines, Pakistan, Bangladesh, Indonesia, Nepal, and Sri Lanka. The portion of likes from these “click farm” countries that engaged with Veritasium’s Facebook page (either by sharing, liking or commenting on posts) was less than 1%. This compared extremely poorly with the engagement levels coming from Western countries, which usually exceeded 25%.

Muller is saying two things. Firstly, it appears that most Facebook likes are fake. And secondly, it appears that fake likes are very unlikely to engage with new content. This is not overly surprising, but is it a problem?

Apparently, yes.

Due to the way that Facebook distributes information, fake Facebook likes are less than worthless. When you create a post, Facebook will distribute it to a small fraction of the people who like your page in order to gauge their reaction. If they engage with it (by sharing, liking or commenting), then Facebook will distribute the post to more of your likes and maybe even to their friends. However, if you have a large number of fake likes, then Facebook’s initial distribution will go out to less real fans and therefore receive less engagement. As a result, you are likely to reach a much smaller number of people.

This is counter-intuitive, but it makes sense, and has significant implications for marketers. It means that advertising your page on Facebook could do you more harm than good. Making it harder for you to reach true fans, and harder for them to spread the word.

Understanding vs. Understood

Management consultants thrive in the fertile middle ground, a place where new understanding and being easily understood are both essential

YOU may have had the experience of talking with a technical expert like a computer programmer and, at the end of a long conversation, being left with the overwhelming impression that you have absolutely no idea what it is that they do.

The person is an expert, interacts regularly with other experts, and has a good understanding of his or her field.

And yet, they can’t make themselves understood.

Heavily regulated industries like law and tertiary education often end up being dominated by this kind of boffin. Largely protected from competition and other economic forces, they seek to further their careers by arguing among themselves over minor technical points.

With a deep understanding of their respective subjects, they are understood by nobody, and sometimes even manage to confuse themselves and each other.

On the other end of the spectrum are a certain breed of writer and public speaker. The kind who earns a living by synthesizing and clearly conveying concepts developed by others. Part educator and part motivator, they earn their money not from developing new understanding, but by being easily understood and so appealing to a mass audience.

Management consultants thrive in the fertile middle ground, a place where new understanding and being easily understood are both essential.

Trusted by clients to examine their most important problems, consultants need to produce new insights based on the facts at hand.

At the same time, consultants work with senior executives who, often non-experts in “consultant jargon” and invariably busy, require consultants to provide clear recommendations that can be easily understood.

Give and Take

But mostly give

Give and Take

You are probably familiar with “gains from trade”. The notion that society is based on give and take. You help me, I reciprocate, and together we benefit.

The idea is a powerful one and forms the basis of the free market economy.

The invisible hand of market forces, as Adam Smith put it, enables market participants to work for their own benefit, and make society better off in the process. The profit motive fuels competition, from buyers and sellers, resulting in better products and lower prices.

But what if you help me, and I can’t reciprocate? What if you have the capacity to give, and we don’t have the ability to repay you right now?

You write a blog post that helps us, and we’ve never met you. You sing a song that makes us smile, and we never thank you. You write an ebook which changes our world view, and you gave it away for free.

Welcome to the Information Age and the Gift Economy, where the cost of helping one more person is now zero. It’s now easier than ever to give, if you choose to do so.

The problem with this new state of the world is that it requires new thinking.

The people who benefit most from your work may not be the ones who are able to pay you for it. In the world of tech startups, B-School Professors call these people “users”. On one level, this helps to distinguish them from paying customers. But words are powerful things. On another level, this term is used to pigeon-hole. These people can’t reciprocate. They can’t uphold their side of the implied social contract. These people are “users”.

This is old thinking, and the term offends us. You would do much better to think of people who benefit freely from your work as friends.

In a world where you have the capacity to give, and the cost of sharing with one more person is zero, what are you waiting for?

You can’t wait for permission, because nobody will give it to you. And you can’t wait to be paid, because there is no money.

But by giving generously, and creating something remarkable, you can earn the permission to do it again. All the while turning strangers into friends and, if you’re lucky, turning friends into customers, and customers into loyal customers.

It’s a process, and it starts with giving.

Management vs Leadership

Management requires smooth process, leadership requires clear vision

Management vs Leadership

Management is about running systems, processes, and people.

Leadership is about taking action, and inspiring others to do so. Having a vision, and the ability to influence and motivate others to sail towards it.

Your team needs both.

If you have no managers, then key details, tasks and deadlines are likely to be missed.

No leader, and your team becomes a ship without a rudder. You are likely to become lost at sea.

Thoughts on PwC’s Booz Purchase

The deal will almost certainly result in post-merger headaches 

PwC Booz Merger

As we learnt at the end of October last year, PwC and Booz & Co are planning to merge.

PwC Chairman Dennis Nally and Booz CEO Cesare Mainardi were very upbeat about the proposed deal. Nally stating that the merger will strengthen the scope and quality of PwC’s service offering. Mainardi, even more effusive, stated that the merger will “help reinvent management consulting for the next century.”

We believe Mainardi is wildly optimistic, and the deal poses big risks for PwC that Nally is either underplaying or overlooking.

But before discussing our reservations, let’s first take a look at the background to the deal.

1. Background to the Deal

1.1 Enron Scandal

PwC is widely known as one of the world’s Big Four accounting firms.

People sometimes mistakenly believe that PwC only provides accounting services, when in actual fact its audit business generates less than half its revenues.

There is a good reason for the confusion.

Back in 2001, Enron collapsed in spectacular fashion and Arthur Andersen, Enron’s auditor of 16 years, was implicated in the accounting scandal and ultimately went out of business.

Why would a trusted global accounting firm like Arthur Anderson fail to properly audit Enron’s books? Well, as it turned out, Arthur Anderson earned more from Enron in consulting fees than it did in auditing fees.

Small conflict of interest.

In the wake of the Enron scandal (among other accounting scandals), regulators took a stronger stance on auditor independence, and PwC ultimately sold its consulting arm to IBM for around $3.5 billion.

And so, as of 2002, PwC was just a big old accounting firm.

1.2 Gold Fever

The consulting industry continues to grow and, in search of higher margins, PwC has thrown itself back into the consulting game head first.

While assurance services are PwC’s traditional bread and butter, revenues have stagnated. Less than half of PwC’s revenues now come from its assurance business, and consulting is one of its fastest growing operations.

Since 2009, PwC has made numerous acquisitions including Paragon Consulting Group, the commercial services arm of BearingPoint, Diamond Management, PRTM, and smaller firms in the digital, social media and environment space.

If the PwC-Booz merger goes through, PwC will gain an additional 3,000 employees in 57 locations worldwide.

The deal received the green light from Booz’s partners in December last year and we expect it complete without any major hiccups, pending clearance from regulators in various countries.

1.3 Industry Consolidation

On the other side of the table, Booz & Co appears to be responding to increasing pressure for industry consolidation. While there is strong demand for consulting firms with global reach, the value proposition of medium sized firms like Booz is becoming harder to sell. As a result, commentators are expecting a wave of consolidations, and we understand that Booz received multiple propositions before accepting overtures from PwC.

2. Headaches Ahead

The proposed PwC-Booz merger is likely to create headaches for PwC and government regulators.

There are 3 issues that the merger is likely to throw up.

2.1 Cultural Integration

Booz describes itself as a firm of practical strategists, collaborative by nature, and committed to its clients’ success. They are a mid-sized consulting firm that provides dedicated and flexible support to senior management. In stark contrast, PwC is a gigantic behemoth which comprises a network of offices in 158 countries with over 180,000 employees offering a smörgåsbord of services.

Our intuition is that the marriage is likely to be a difficult one, and the honeymoon period will be short.

Our view is informed by three observations.

Firstly, cultural integration is a difficult and delicate process. PwC will be tempted to do too much too soon, for example, by forcing Booz to adopt its branding, work practices, and support services. The more hoops that Booz employees are forced to jump through, and the faster the transition period, the more tension this will create.

Secondly, there will be conflicts of interest. Immediately post-merger, some of Booz’s clients are likely to be in doubt. Strategy consulting for audit clients is banned in some countries, and even where it is legal it raises serious “conflict of interest” issues (think Enron). This will place pressure on any Booz partners whose clients are affected and, to the extent that this prevents PwC and Booz from cross-selling, it will limit opportunities for revenue growth.

Thirdly, strategy consulting is more prestigious than auditing, and so Booz consultants may consider joining PwC as a career step backwards.

2.2 People Have Legs

Cultural integration may be the least of PwC’s worries.

In exchange for its $1 billion investment, the main asset that PwC will obtain is people. The problem with this deal is that people have legs.

We expect that the most talented Booz consultants will leave Booz even before the ink on the merger agreement is dry. As a case in point, shortly after the merger plans were announced in October last year, the Australian Financial Review reported:

Booz & Company management consultants have rushed to update their resumes and LinkedIn profiles after a proposed takeover by big four accounting firm PwC was announced…

Luckily for PwC most of the human capital is held by Booz’s partners with their years of experience and client connections, and key rainmakers will be required to stay with PwC for a number of years if they want to receive their full payout.

The real test then of the merger’s success will come in a few years time when Booz’s partners are free to leave. If they depart en masse, then PwC will be left holding the bag.

The problem is not just that many Booz consultants and partners are likely to leave, but also that the most talented graduates, the ones who may have considered working with Booz, are likely to stay away. For one thing, PwC is not as prestigious as Booz. In the coming few years, smart students will also want to avoid the turmoil that inevitably accompanies post-merger cultural integration.

2.3 Conflicts of Interest

In buying Booz and other consulting firms, PwC is not only purchasing revenue growth, it is also acquiring conflicts of interest and the reputational and regulatory risks that go with them.

Reputational risk destroyed Arthur Anderson 13 years ago. The conflicts of interest between Arthur Anderson’s consulting and audit practice encouraged a small number of its partners to turn a blind eye to the substandard auditing of Enron’s books. When the accounting scandal came to light, Arthur Andersen lost credibility in the market and experienced a mass exodus of clients. It ultimately went belly up.

In the wake of the Enron scandal, PwC placated regulators by retreating from consulting work altogether.

In 2011, following the 2008 collapse of Lehman Brothers, the European Commission published plans for the Big Four to sell their consulting divisions due to concerns about the quality of company audits. To our knowledge, the Commission’s plan wasn’t followed through, but the high-profile PwC-Booz merger will place the conflict of interest between auditing and consulting in the regulatory spotlight once again.

Arthur Levitt, former head of the Securities and Exchange Commission, warned that firms are slipping back into old, bad habits. Levitt noted that “as the accounting profession becomes more committed to consulting, their audit activities have got to be questioned.”

If regulators decide to take a stronger stance on this issue, as well they might, then any gains that PwC achieves from its acquisition of Booz may end up being substantially offset by the cost of responding to a regulatory crackdown.

3 More Reasons to Hire a Consultant

Consultants can provide genuine expertise, tested methodologies, and quality resources on a variable cost basis

Genuine Expert

In the previous post, we highlighted 6 reasons why executives hire management consulting firms.

On reflection, we may have implied that there are only 6 reasons when in reality there are many.

Tim Jeffries, experienced Sydney based management consultant, sent us 3 more reasons why executives hire consultants. The reasons are good ones, and so we’d like to share them with you.

All told, we now have 9 good reasons why executives hire consultants.

Continue Numbering:

7. Genuine Expertise: Many consultants have an industry specialisation, which they can use to provide relevant and timely insights to executives. While executives will typically have industry experience, a consultant may have worked with many different companies in the same industry. This means that consultants will often have a broader perspective and access to key industry insights that an executive may lack.

8. Proprietary ‘Toolkit’: Many consultants use methodologies to help them simplify and standardise their approach to different kinds of issues. By using reliable and tested methods, consultants can help an executive turn an ambiguous and unresearched request for help into a clear understanding of the problem, and actionable recommendations.

9. Quality Resources (No Fixed Cost): By engaging consultants, an executive can access highly skilled workers on a variable cost basis. This may allow an organisation to reduce risk by lowering its fixed labour costs. It also provides an organisation with the flexibility to pursue more projects if there is sufficient demand.

6 Reasons to Hire a Consultant

There are 6 reasons why executives hire consultants

Hire a Consultant

In America, and other Western countries, senior executives often hire management consultants for strategic advice.

Given that consulting advice can sometimes sound like a statement of the obvious, albeit very well power-pointed, and tends to come with a shockingly high price tag, you would be forgiven for asking “why!?”

As it happens, senior executives are not necessarily stark raving mad. There are 6 good reasons why executives might want to hire a management consulting firm:

1. Stamp of Approval: Executives often need to make unpopular decisions, and bringing in a consulting firm to support the proposed course of action can give the executive the credibility needed to convince the board and command authority with employees. Unpopular decisions might include anything from introducing a new product, entering a new market, changing the organisational structure, freezing salaries, or firing employees.

2. Scapegoats: Getting a stamp of approval comes with the added benefit that executives can distance themselves from decisions that go wrong. An executive who can say to the board “we acted on McKinsey’s advice!” may be able to save her skin. This is a service worth paying for.

3. Independent Third Party: If consultants are merely a stamp of approval and scapegoats for scared executives, then their real value to an organisation may be open to question. Fortunately, they serve other purposes as well. For one thing, consultants can act as an independent third party. Since they are not full-time employees, consultants do not have vested interests within a client’s organisation which can make it easier for them to identify problems and make recommendations without fear of political reprisal.

4. Open Communication: Large companies can become very bureaucratic (think Microsoft), and factional turf wars can result in limited communication between departments. It such cases, it may be easier for consultants to arrange interviews with people in different parts of the business. Even in companies that aren’t stifled by bureaucracy, executives are often isolated at the top and don’t have access to all the information that they need. Consultants have the ability to talk with customers and with people at all levels within the organisation, synthesizing and reporting back to the executive team.

5. Dedicated Focus: Organisations often face a tension between short and long term objectives. And so, urgent problems and day-to-day business often take priority over important long term considerations. Consultants can help by focusing on specific problems that would otherwise not receive the attention they deserve.

6. Pattern Recognition: Nobody knows a client’s business or industry better than the client. However, senior consultants can take on the role of a doctor, diagnosing symptoms and recognising familiar patterns of where things are likely to be going wrong.

Well, there you have it. Six reasons why executives hire consultants.

We acknowledge that this post is slightly one sided. We have mentioned nothing of the potential pitfalls of engaging consultants.

What do you think?

Would you hire a consultant?

Oxford Inspires 2014

Oxford Inspires

For those of you planning to be in the UK in March, we would like to share with you details of an exciting event being hosted at Oxford’s Said Business School.

Oxford Inspires is an entrepreneurial conference taking place on the 8th and 9th of March this year. The event is hosted by Oxford Entrepreneurs, the largest student-run entrepreneurship body in the world, and brings together leading entrepreneurs to educate and inspire budding entrepreneurs based in Oxford, London, and beyond.

The speaker list for this year can only be described as impressive, and we are informed that full details will be up on the website shortly. For a look at last years line up, and more information about the conference, visit the website.

You may also want to check out the Facebook Group where the dynamic Ridhi Kantelal and team will be posting information about the upcoming launch party, VIP opportunities and other exciting developments.

Tickets to the conference are now available. If you are interested, or know someone who might be, share this post or buy your ticket now to avoid disappointment.