With great power comes great responsibility...
When we hear the term responsibility coined in management speak, we often think of the CSR schemes which rose to prominence in the 1990s and have since quite rightly evolved to encompass a wide range of initiatives from ethics to sustainability.
However, from a consumer perspective, these initiatives are often at risk of being seen as window dressing at a time when the core fundamentals of the operation are seen as far from ‘responsible’. In the wake of the Cambridge Analytica scandal in particular, many an eye has been cast over the giants of Silicon Valley and whether, for all the woke posturing in public, they have genuinely had an eye on ‘doing the right thing’ .
Google famously wove the mantra ‘don’t be evil’ into its code of conduct but, in the age of the unicorn, it seems many other businesses have more of an eye on funding than principles as the recent WeWork IPO so sharply calls into focus.
The last few weeks, however, have shown signs that the winds of change may finally be beginning to blow through the Valley. Firstly, on October 30th, Jack Dorsey announced that Twitter would be ending all political advertising on the platform, stating that they believed a message should be ‘earned not bought’. Then, on 6th November, Airbnb announced that, some 11 years after launch, it would verify the listings on its site and even guarantee to refund customers if they are misled by inaccurate listings. Finally, even Facebook entered the fray, announcing on 5th November that…drumroll please… they were changing their logo to capital letters (perhaps we do still have a distance to travel after all!)
For years, the mantra of the .com giants is that, whilst they provide access to content or services, they are not responsible for the content itself. This ‘consumer generated’ model has allowed them to grow without the burdens faced by the traditional brands they compete against. Regulators have struggled to keep up and, as a result, social networks have often escaped the kind of scrutiny that traditional broadcasters, travel operators or retailers have come to expect. Furthermore, they are able to deliver their services without the capex burden on the balance sheet that the very ‘pipes’ they rely on (e.g. telcos) have to cope with.
So what’s behind this sudden crisis of conscience? There is undoubtedly significant pressure coming from the outside. As Spidey was told by Uncle Ben, ‘With great power comes great responsibility’ and from the people I speak to in research the sense is that consumers now quite rightly expect these brands to step up. This sentiment echoed in many of the long-standing consumer barometers such as the Edelman Trust Report. This report shows 81% claim trust is a critical factor in the brand they buy and that 53% claim they’re able to spot ‘trust washing’
This puts the onus on this new generation of digital players to clean up their act; from counterfeit goods on e-Bay to fake reviews on Amazon, its no longer acceptable for brands to wash their hands of responsibility. Hopefully this will mark a shift in focus away from growth at all costs to a business relationship with customers where more ‘traditional’ metrics such as lifetime value come back into focus. Whilst this may still seem a way off, the irony is that if these current low levels of trust aren’t addressed we may start to see a direct impact on the very thing that these brands are still obsessed with – growth.
Nowhere is this brought into sharper focus for me than the Portal, recently announced by Facebook. On the face of it, it looks like a great product. The ability to use the big screen to video call and connect with friends and family. I’m sure I’m not the only one who can think that their children would love to be able to video chat with grandparents etc who often struggle with Facetime on iphone. However, my first comment to my wife when seeing the ad was ‘would you really trust Facebook to put a camera in your lounge?!’ A quick glance through the online reviews reveals the same sentiment; a decently priced product, fulfilling a consumer need but... what about the security concerns? ...What about privacy? Do I really want the Zuck watching my every move at home?
One can only hope that the recent announcements from the likes of AirBnB mark the start of a shift where digital players are focused on a long-term sustainable growth model backed by ‘doing the right thing’ rather than an obsession with short term goals. Customer support of the ilk outlined by AirBnb does not come cheap. According to The Information, growth in the cost base at AirBnB is already outstripping revenue growth (47% vs. 31%); building additional costs for supporting travellers may be the right thing to do for the long term health of the brand but it will create even more pressure on the P&L at a time when it’s looking to IPO.
At the same time this also presents an opportunity for legacy brands who have struggled to keep pace with the cool kids. In the retail sector particularly, physical retailers have long campaigned for the introduction of a digital sales tax to reduce the disparity in cost base between digital and high street brands. Whilst it might not close the gap completely, consumers also applying pressure on this new generation of brands, may see digital players simply having to adapt their cost structures to deliver on customer expectations.
Perhaps the real opportunity for legacy players is to focus on the elements where they have clear potential to excel (such as service and experience) rather than trying to beat the next generation head on...