How Disruption Works: Job Loss Isn't Really Job Loss

from the jobs-move-around dept

One of the key points in understanding how disruption works is to recognize that as old industries fail, new industries grow up to take their place. For a true free market to work, failure has to be not just accepted, but embraced. Tragically, in the crony capitalist system we have today, large incumbents go running to the government as soon as they're disrupted, whining about how the disruption is not the normal workings of disruptive innovation, but rather "the end of the world" and a sign of clear evil. It's why you hear talk of "too big to fail" and all sorts of efforts to paint new innovations as illegal, rather than just disruptive competition. Yet, as we've seen over time, disruptive innovation may move jobs around and cause certain sectors to diminish, but it tends to open just as many, if not more, opportunities elsewhere over time. I don't think I've ever seen that displayed quite as clearly in graphic form as in a chart that LinkedIn recently released, looking at what parts of the industry have been growing and which parts have been shrinking over the past few years: This chart caught the attention of Paul Smalera, who specifically noted that newspapers are at the very bottom, but online publishing is right near the top on the growth side -- a near perfect showing of how jobs shift over time. He notes the classic Innovator's Dilemma issue with news companies, where they thought they were in the business of selling newspapers, and that held back their ability to innovate:

They have been trapped in a terrible mindset that they are in the business of selling newspapers. The leap from paper to digital may be vast, but to newspaper publishers, it seemed like vaulting to a different business entirely, one they were loathe to get into. No matter what kind of lip service newspapers paid to the digital transformation, the most prominent paywall model out there, that of the New York Times, still protects print subscriptions with a tiered digital pricing strategy – one so annoying that it motivated its former digital design director to complain publicly about the entire signup process.

The lesson online media companies have taken from newspapers’ slow, public death is to move beyond the idea of selling the product. Online sites are selling their audience. It’s a simple twist of the equation, but one that changes everything about how a media company is run. A CEO who has realized that her audience – her customers – is the most important thing the company has will stop at nothing to give those customers what they want. Anything to make them feel as if they’re getting value from the company. And although she’ll monetize their aggregate value with advertisers and marketers, she’ll also protect them from underhanded sales pitches or confusing pricing strategies that infuriate the web-savvy.

This is a really good point on multiple levels. Beyond the innovator's dilemma (and the key point of figuring out what the real product is), Smalera is also debunking one of the popular myths of the internet era: when you're selling a user's attention, companies will naturally abuse their users. What he notes is that companies that do this don't end up lasting through the long haul, because users get annoyed and go elsewhere. Even though it's become a common pejorative statement among neo-luddites to mock the idea that the "users is the product," one thing that is true when that happens is that the companies need to treat their users right, or they have a crappy product that they can't sell.

Similarly, Mathew Ingram uses this to discuss why it's so difficult for legacy businesses to adapt, noting that it's difficult to change business models on the fly. Not only do you have to make big bets on new things, but you also have to keep the legacy business running while at the same time trying to undercut it with the new thing. It's why so many companies fail the innovator's dilemma test. Unless you have incredibly visionary leadership who can push a company through with a strong and clear vision of why the company must move in that direction, the magnetic appeal of trying to prop up increasingly obsolete businesses is just too strong.

But, the failure comes not because of some new "threat" or because of some kind of disgraceful activity (no matter how much legacy players try to describe it that way), but because corporate leadership chose to let others innovate, rather than supporting a plan of out-innovating themselves. Very, very few companies are willing to cannibalize their own business models -- but the failure to do that just means that someone else cannibalizes it for you.

And it goes way beyond news. The chart above shows some other key areas of disruption as well. That clump of retail, automotive, construction, banking, telecommunications, pharmaceuticals and real estate represents prime feeding ground for the next decade of disruption -- much of which has already started. You don't necessarily see the corresponding growth points on the opposite side of the chart, but as with newspapers and online publishing, give it a few years, and those new jobs and industries will make their way up the chart, as the legacy players continue to shrivel up (and whine all the way down).

Filed Under: disruption, growth, jobs
Companies: linkedin

Tons Of Companies Sued In Class Action Lawsuit Over Uploading Phone Addressbooks

from the class-actions-in-action dept

There was some controversy a month or so ago, when it came out that app maker Path was secretly uploading your entire address book to its servers. The company apologized and deleted all the data. Of course, pretty quickly, people realized that lots of apps do this, if you allow the app to search your address book to see who else you know is already using the service. The way they do this is to upload your address book. I would have thought this was, well, obvious, but not everyone seemed to think so (it's also why I never use that feature). Either way, lots of apps quickly changed either how they work or how they explain what happens with that feature.

But, of course, in our litigious society, that's not going to stop the class action lawsuits from being filed. In a 152 page document, a class action lawsuit has been filed against pretty much every big name company in the space:

Path, Inc., Twitter, Inc., Apple, Inc., Facebook, Inc., Beluga, Inc. ., Yelp! Inc., Burbn, Inc., Instagram, Inc., Foursquare Labs, Inc., Gowalla Incorporated, Foodspotting, Inc., Hipster, Inc., LinkedIn Corporation, Rovio Mobile Oy, ZeptoLab UK Limited aka ZeptoLab, Chillingo Ltd., Electronic Arts Inc., and Kik Interactive, Inc.,

The lawsuit kicks off by quoting Robert Fulghum's "All I really Need to Know I Learned In Kindergarten," saying, "Don't take things that aren't yours." Of course, as with many such class actions, this one is all about getting the lawyers paid. This isn't to say that I think the actions in uploading the address books were ok, but worth a lawsuit? Seems a bit extreme. It seems that the public pressure about all of this has caused pretty much all of these companies to change how they work, and it's unlikely any real significant "harm" came from this.

Filed Under: address books, class action, privacy, uploading
Companies: ea, facebook, foursquare, instagram, linkedin, path, rovie, twitter, yelp

Can A Company Keep An Employee's LinkedIn Account After They're No Longer Employed?

from the how-does-that-make-sense dept

Venkat Balasubramani has the story of a bizarre fight between a company, Sawabeh Information Services, and the founders of Edcomm, a company that Sawabeh bought in 2010. A few months later, the founders of Edcomm were fired, and the lawsuits commenced. There are a variety of issues here, and Venkat's post goes through most of them in detail, but I wanted to focus on just one: the fight over who gets to control Dr. Linda Eagle's LinkedIn account. Eagle was one of the founders of Edcomm and the key figure in this fight. Sawabeh claims that Eagle "misappropriated" her own LinkedIn account and the contacts associated with it, by continuing to use it after being fired.

While I can kind of understand some of the legal fights over who gets to control Twitter accounts, the entire point of a LinkedIn account is to represent an individual and their job history. How would it possibly make sense for a company to control an ex-employee's LinkedIn account?

The company seems to think that the LinkedIn account was more like a rolodex. Because (for reasons that are beyond me), Eagle had let others in the company access and manage her account, as soon as she was fired, people at the company accessed her account and then changed her "name" and profile picture to someone else at the company. That would be pretty shocking for her connections, who might not know who the guy was at all. They also tried to do this with the account of one of the other fired founders, but they didn't have his password. Apparently the company asked LinkedIn to hand over the password, and LinkedIn, properly, told the company to get lost.

Either way, the court digs into the "misappropriation" question with the LinkedIn account and refuses to dismiss it out of hand (at this stage of the case), which seems too bad. However, there's an unclear issue of who "developed" the contacts in the account:

The Counterclaim Complaint expressly alleges that, with respect to the LinkedIn account connections and content, "Edcomm personnel, not Dr. Eagle, developed and maintained all connections and much of the content on the LinkedIn Account, actions that were taken solely at Edcomm’s expense and exclusively for its own benefit." ... While Plaintiff argues that Edcomm fails to allege facts that would show that it made a substantial investment of time, effort, and money into creating the cell phone number or LinkedIn account, Edcomm counters that its employees developed the accounts and maintained the connections, which are the route through which Edcomm contacts instructors and specific personnel within its clients. As these conflicting allegations create an issue of fact requiring further discovery, the Court must deny the Motion for Judgment on the Pleadings as to the misappropriation counterclaim.

Of course, I wonder if they're arguing about the wrong thing here. If the company developed the contacts, perhaps it has a right to ask for a copy of the contacts, but the account itself seems like it should belong to Eagle. Part of the problem here is the idea that contacts are some scarce resource. Both parties can have them, and the simplest thing would be, if there is a legitimate claim that the company developed those relationships, to require that their contact info be provided to the company -- but leave the account in the hands of Eagle.

Either way, the case should be a warning for any company that wants to control the LinkedIn accounts of its employees.

Filed Under: contacts, linda eagle, ownership, social media
Companies: edcomm, linkedin, sawabeh information services, siscom

Facebook, Twitter, eBay & Other Big Internet Companies Come Out Against SOPA

from the good-for-them dept

While Google has been pretty vocal about its complaints concerning PROTECT IP and SOPA, and Yahoo, LinkedIn and Zynga have expressed concerns elsewhere, the silence of large companies like Facebook, Twitter, eBay, Mozilla and AOL had been unfortunate. That appears to be changing. As a group, they have now all sent a letter to the key sponsors of both bills, arguing that the approach here is the exact wrong approach, and will do significant damage to the parts of the economy that are innovating and creating jobs today:

We are very concerned that the bills as written would seriously undermine the effective mechanism Congress enacted in the Digital Millenium Copyright Act (DMCA) to provide a safe harbor for Internet companies that act in good faith to remove infringing content from their sites. Since their enactment in 1998, the DMCA's safe harbor provisions for online service providers have been a cornerstone of the U.S. Internet and technology industry's growth and success. While we work together to find additional ways to target foreign "rogue" sites, we should not jeopardize a foundational structure that has worked for content owners and Internet companies alike and provides certainty to innovators with new ideas for how people create, find, discuss, and share information lawfully online.

We are proud to be a part of an industry that has been crucial to U.S. economic growth and job creation. A recent McKinsey Global Institute report found that the Internet accounts for 3.4% of GDP in the 13 countries that McKinsey studied, and, in the U.S., the Internet's contribution to GDP is even larger. If Internet consumption and expenditure were a sector, its contribution to GDP would be greater than energy, agriculture, communication, mining, or utilities. In addition, the Internet industry has increased productivity for small and medium-sized businesses by 10%. We urge you not to risk either this success or the tremendous benefits the Internet has brought to hundreds of millions of Americans and people around the world.

Can't wait to see the usual commenters stop by to insist that basically every big company on the internet is only saying this because they're dedicated to infringement. But the real question is: at what point does Congress realize that there's real opposition to this bill from one of the few industries out there that's actually doing well these days?

Filed Under: censorship, copyright, innovation, internet, sopa, tech
Companies: ebay, facebook, google, linkedin, mozilla, twitter, yahoo, zynga

Don't Try To Make Sense Of LinkedIn Share Price

from the it's-a-game dept

The big Silicon Valley IPO today was LinkedIn going public. In many ways, it's a great story, in that LinkedIn isn't an overnight sensation by any means, but really was a company that built up a strong and loyal user base over many years. However, Silicon Valley has been pretty starved of "celebrity" IPOs for quite some time. Of course, in typical Silicon Valley celebrity IPO fashion, the stock shot up much, much higher than its offering price. In the past I've talked about how this is really about a company having left a ton of money on the table (i.e., LinkedIn only got $45 for all of the shares that hit the market, so the stock trades over $100 are between others, and doesn't directly -- immediately -- impact LinkedIn's cash position, though later stock sales can obviously benefit).

I've always found the obsession with the "first day pop" kind of a weird infatuation in Silicon Valley, often done by people who don't recognize what it really means (i.e., that it was priced low). However, there's been a lot of hand-wringing about how LinkedIn's valuation from the super high share price seems ridiculous based on its revenue. And, I agree. It's nearly impossible to match the valuation to the company's actual financial situation. However, this is the nature of the game. Certainly one part of the problem is that some of the buyers and sellers in the market don't really understand what it is they're buying and selling and how to value it. That's just the way things are with the stock market. However, the bigger issue is that people buying and selling the stock are really judging price on two separate factors. The underlying value of the stock is certainly important, but for many people, rather than betting on that, they're betting on everyone else. That is, they're not buying and selling based on a long-term concern for the actual value of LinkedIn, but they're trading short-term by betting on what they think everyone else will value the stock at. In the long-term, that's not sustainable, but it's the simple nature of "the game."

On the last Planet Money podcast, they explored whether or not there's a "gold bubble,", but they actually do a nice job explaining how bubbles form, even though "rational economists" suggest it shouldn't be possible. In the podcast, there's a great story about some experiments, in which students (including business students who should understand this) are given opportunities to buy and sell a single stock with a very clearly defined value... and yet bubbles still form, where people (who can't even explain why) overbid on the price of the stock, even though the real underlying value is known.

To some extent, it's that people don't intrinsically understand statistics and value. Part of it is that people get tied up in "the game." And part of it is just psychology. But the fact is that bubbles form all the time, and trying to rationally value something in a bubble isn't a particularly fruitful game in the short term, because the length and extent of a bubble are nearly impossible to determine (long term is a very different story). So, for everyone fretting about the price to value question on LinkedIn, unless you're looking for a long term investment, at this point, it's a meaningless question. What's happening now is gambling and entertainment masquerading as a serious "investment" issue.

Filed Under: ipo, price, value
Companies: linkedin

If You're Going To Court To Prove Harrah's Is Not Your Employer, Probably Don't List Harrah's On Your LinkedIn Profile

from the just-a-tip dept

Yet another story of someone running into trouble in court due to their social networking profile. A guy sued Harrah's, claiming he was fired in an age discrimination suit. In an effort to get out of it, Harrah's claimed it never really employed the guy. Instead, it noted that he had been employed by the Grand, which was then bought by a subsidiary of Harrah's, and thus it was the subsidiary who should be considered the employer for the sake of the lawsuit. The guy debunked this by showing that he'd been given a Harrah's employee handbook, and his paychecks came from Harrah's. But, sealing the deal was that Harrah's own witness who tried to tell the court that the subsidiary (for which he worked) was not Harrah's listed Harrah's as his employer in his LinkedIn profile, and when confronted tried to claim it wasn't really his profile:

the evidence supporting Defendants’ explanation for Plaintiff’s termination consists primarily of Hirsch’s testimony, and Hirsch was not a credible witness. Notably, Hirsch testified that he did not work for Defendants even though he listed [Harrah's] as his employer on his LinkedIn page. When confronted with this inconsistency, Hirsch could not offer an explanation except to state that it was not his LinkedIn page. This assertion was incredible given that Hirsch had already verified all of the information contained on the LinkedIn page as being accurate. This and other inconsistencies and illogical conclusions discredit Hirsch’s testimony that Plaintiff’s Action Plan was intended to improve Plaintiff’s performance.

Filed Under: evidence, social networks
Companies: harrah's, linkedin

Do You Own Your Social Networking Friends? Or Does Your Employer?

from the do-you-own-your-rolodex? dept

In the sales world, you're often judged on the size and quality of your "rolodex" of contacts. No one expects a salesperson jumping from one job to another to somehow "forget" everyone they know -- or to cough up their entire list of contacts to the previous company. Yet that seems to be what happened in the UK. Slashdot points us to the news of a court ruling where a guy was forced to give up his LinkedIn contact list to his former employer after he left the company to start his own business. In this case, the original company had actively encouraged its employees to make use of LinkedIn, even though it was under the individual's control, rather than the employer's.

Expect to see plenty more lawsuits like this going forward. For many users of social networks from LinkedIn to MySpace to Facebook, the connections you make blur the lines between professional and personal -- and the questions of who actually "owns" those contacts will become a legal issue that the courts will decide over and over again. Of course, the truth is that this is a silly debate. No one "owns" a contact in the first place. If the company has a rule requiring employees to hand over contacts to the company, then it should employ a CRM system which the company controls. Otherwise, reaching into a personal social networking account seems to go beyond what's reasonable.

Filed Under: contacts, social networks
Companies: linkedin

Nigerian 419 Advance Fee Scammers Move To... LinkedIn?

from the suckers,-suckers-everywhere dept

It still seems difficult to believe that anyone falls for those "Nigerian" advance fee 419 scams, but time and time again we read about smart people who should know better who fall for them. And reports come in about just how much money these scams make. And, the really amazing thing, is that many of the victims are so convinced by the scam that even after it's all revealed, and they've lost all their money, they still believe the scammer's story. However, times are getting harder to convince people about these scams over unsolicited email, so apparently they're starting to move onto social networks, including business social networks like LinkedIn. Perhaps I just use LinkedIn in a very different manner than most people, but I find it hard to believe that if some random unknown person suddenly "connected" to you on LinkedIn and offered you a cut of a multi-million dollar stash, you wouldn't be suspicious.

Filed Under: 419, advance fee, nigeria, scams, social networks
Companies: linkedin

Is LinkedIn The Latest To Play The Skype-Hype Valuation Bubble Game?

from the anyone-taking-bets-on-the-final-amount? dept

Over the past few years, we've noticed a pretty consistent pattern among startups trying to create huge valuations for themselves in a short period of time. While other companies have done it in the past, the latest cycle really kicked off with Skype confusing people into thinking it was worth billions. Despite having relatively low revenues, there suddenly leaked rumors that Skype was for sale. Skype denied it, and then had one of its investors say the company was worth well over a billion. Then the feeding frenzy began, until eBay came out the winner -- a move it later regretted. Facebook was the next to follow the Skype Hype Strategy, but may have been a bit too early to the game. It took an extra year, but the company may have outdone Skype in its $15 billion valuation (though, unlike Skype, Facebook hasn't turned that into real cash yet). In between, YouTube used a nearly identical strategy to pump up its valuation.

Here's what you do: get a little buzz. Leak a report to the press about a buyout offer. Deny the reports of the buyout offer and then have either an exec or an investor make an offhanded remark about how the company is actually worth billions, allow the feeding frenzy to begin and eventually pick an exit opportunity. It also doesn't hurt to have some sort of PayPal connection (which both Facebook and YouTube had). The latest to test out this strategy may be LinkedIn, which also has the PayPal connection. Last week the rumor broke that News Corp was trying to buy LinkedIn. The company's CEO quickly denied the report and said that the company would need to sell for "a lot more" than a billion dollars. Now, the latest reports are that News Corp isn't buying LinkedIn, but just like those other stories, the stage has now been set. Suddenly others may start thinking that perhaps LinkedIn is a good buy for over a billion dollars, and the feeding frenzy begins again. Anyone want to take guesses on the next startup to play this game?

Filed Under: buyout, hype, rumors
Companies: facebook, linkedin, news corp., skype, youtube

What Else Can We Blame On Facebook? How About Helping The Mob?

from the any-other-conspiracy-theories dept

Constantine von Hoffman has been doing a nice job tracking both how security firms are blaming Facebook (or any other popular social network) for just about anything, but also how the press keeps falling for it. His latest find is to trash an Australian news organization for writing up a whole article on how Facebook, Linkedin and MySpace are popular feeding grounds for organized criminals without bothering to talk to a single other source than a security firm who has a vested interest in generating headlines and making people worried about security. As Constantine notes, he has no reason to doubt that the claim true, but it seems like the press should at least look for a second, less biased, source for confirmation.

Filed Under: organized crime, security, social networks
Companies: facebook, linkedin, messagelabs, myspace