It is a first for this analysis column to look at a deal yet to be consumated but since it was reported as nearly-done by the ever-excellent All Things D website owned by news provider Dow Jones then it is likely to happen, and even if it doesn’t it is a great tale of the new world order.
Salesforce, a New York-listed software provider, is reportedly about to buy advertising agency WPP-backed Buddy Media, a US-based social enterprise software, according to news provider All Things D (and referred to in KBS+’s Darren Herman’s great blog on advertising trends).
The deal would be valued at more than $800m, All Things D added, compared to the about $85m raised by Buddy since its launch in 2007.
While Salesforce might only indirectly have had an interest in Buddy – one of the reported target’s early venture capital backers, Bay Partners, had run a developers fund for Salesforce at about the time Buddy was being started – the informal links between the two companies have been good.
In March, Buddy hired Susan St. Ledger as president after more than seven years with Salesforce, most recently as senior vice-president of industry verticals, where she focused on the largest clients within technology, financial services, insurance, media and telecommunications.
Michael Lazerow, founder and chief executuve of Buddy Media and serially-successful entrepreneur behind University Wire and Golf.com, said at the time of St Ledger’s recruitment: "It’s clear that organizations which power connections with their customers will create shareholder value, and those that don’t will lose.
"Susan’s unparalleled experience in enterprise software-as-a-service (SaaS) sales shows her commitment to our company mission and helps us to successfully scale and serve the largest brands and agencies around the world."
The new world order aspect comes from how these connections are powered.
There has been a shift in the past few years of academic research into what are loosely called behavioural sciences into mainstream application by companies to influence people’s decisions.
Or, as Rory Sutherland, vice-chairman at WPP advertising subsidary Ogilvy & Mather, which set up OgilvyChange behavioural sciences practice in the firm earlier this year to apply the techniques across its clients, puts it: "Although they don’t have much else in common, marketers seem to have made the same mistake as neo-classical economists.
"They have become so preoccupied with a model of ‘how people should decide’ that they have completely neglected to ask the question ‘how do people actually decide’."
This approach to understanding the heuristic patterns and shortcuts the brain takes in making decisions* is becoming more readily understood just as the scale of opportunity thrown up by online social and business networks and always-connected devices become near-ubiquitous.
Venture capital firm Kleiner Perkins Caufield & Byers’s Mary Meeker’s latest stunning opus on 2012 internet trends – see table below and link – describes how the "magnitude of upcoming change will be stunning….
"This cycle of tech disruption is materially faster and broader than prior cycles [and affecting the 3000 public companies that have a $36 trillion market capitalisation, according to investment bank Morgan Stanley]."
Buddy Media has proved effective at helping eight of the top 10 largest global advertisers influence how they are perceived and used by consumers through tools built on Facebook – a client list that helps explain why WPP invested $5m into Buddy in late 2010. One of Buddy’s case studies shows how its understanding of social networks led to an increase in a so-called Bogof (buy one, get one free) with a usage rate in the 90th percentile (ie very high).
Whereas the techniques of good salespeople to prime, frame or take advantage of people’s overconfidence have always been around and marketers and advertisers have since the days of Sigmund Freud, Carl Jung and Edward Bernays tapped into people’s system one and basic desires the media of communication has either been limited in audience size or opportunity to implement the message quickly. The internet and mobile devices changes this.
This opportunity to nudge people through changing the environment they make decisions in – versus the science fiction ideas of mind control directly, such as Isaac Asimov’s Foundation series – utilising knowledge of behavioural science that people are explicitly unable to affect themselves or realise is happening puts enormous ethical responsiblities in the hands of those making decisions about how to use these tools.
Often the industry leaders, such as Sutherland and the leaders at Buddy Media, are very bright and educated to know how to use the tools for public good – Sutherland gave the example of encouraging people to complete their course of prescription drugs – but most of the account decisions and clients requests are made by more junior people with more limited understanding and experience as well as the occasional amoral or sociopath who create pernicious subliminal messaging, such as the so-called "hell-sell". A little knowledge can be a dangerous thing.
Governments and the media have always known tools and techniques to control and manipulate people in order to drive an agenda, nominally at least in the public’s "best interest".
But with the magnitude of change hitting societies and the pressures on entrepreneurs to disrupt and incumbent businesses to respond and innovate there is probably a greater case for thinking about the ethics of an action or investment before it is done rather than apologise for it afterwards.
In this area, the US intelligence services’ quasi-corporate venturing unit, In-Q-Tel, has taken a notable lead by sponsoring California Polytechnic State University’s Patrick Lin to look at the ethics of drones and robots (see The Atalntic article).
It is an example of hiring ethics advisers that corporations and venturing units in general would be wise to follow.
Table: Mary Meeker’s magnitude of upcoming change:
- Nearly Ubiquitous High-Speed Wireless Access in Developed Countries
- Unprecedented Global Technology Innovation
- Ultra Competitive Markets for Mobile Operating Systems + Devices
- Broadly Accepted ‘Social Graphs’ / Information Transparency
- Fearless (& Connected) Entrepreneurs
- Difficult ‘What Do I Have to Lose’ Economic Environment for Many
- Available (& Experienced) Capital
- Fearless (& Connected) Consumers
- Inexpensive Devices / Access / Services (Apps)
- Ability to Reach Millions of New Users in Record (& Accelerating) Time
- ‘Social Emerging as Starting Distribution Point for Content,’ (Brian Norgard, Chill)
- Aggressive (and Informed) ‘On My Watch’ Executives at ‘Traditional’ Companies
- Unprecedented Combo of Focus on Technology AND Design
- Nearly ‘Plug & Play’ Environment For Entrepreneurs – Marketplaces / Web Services /Distributed Work / Innovative Productivity Tools / Low ‘Start Up’ Cost
- Beautiful / Relevant / Personalized / Curated Content for Consumers
Source: KPCB
*One helpful way for the non-academic to look at this question of how decisions are made is to use the approach laid out by Daniel Kahneman, Nobel prize winner for behavioural finance in his latest book, "Thinking, Fast and Slow". Kahneman talks about system one analysis for the ability to answer questions such as what is two plus two or the capital of France versus the system two analysis needed to work out, say, 24 times 17.
Kahneman himself, in his book and in a webinar hosted by Ogilvy last week, is pessimistic about the ability to change people’s system one or make yourself aware of the biases and heuristic problems that can arise but was more hopeful that knowledge about the dynamics of psychology and the way the mind works would make more "educated gossip" as it became easier to see flaws in others and allow organisations to design procedures to limit the issues that can arise.