April 17, 2014

How Social Media can Kill a Business

I have written several articles on how social media can’t kill a business like United Airlines. There have been other instances where social media had no impact on stock prices of big companies. That is not necessarily the case of a small business. Especially a small business in a small community.

English: Infographic on how Social Media are b...

English: Infographic on how Social Media are being used, and how everything is changed by them. (Photo credit: Wikipedia)

This weekend, there was an incident at a spa in Kalamazoo called M Spa where a young mother with her 2.5 year old son went to get his haircut. Like all 2.5 year olds, he was not all that happy about it. Needless to say, he was being fussy about his haircut. According to an eyewitness Vanessa Hunt, the owner approached the mother and pretty much gave her the hair dryer treatment in front of all her customers. The customer was brought to tears. To top it off, the young boy is autistic.

If you know anyone who has had to raise an autistic child, it is one of the most difficult things you would ever have to face. They are so unpredictable. Depending on the severity of their condition, patience required is an understatement.

According to M Live, the incident has gone viral off the Facebook post. “ By Sunday night, and the post had been shared more than 17,000 times by Monday afternoon. Outraged readers also filled out negative reviews of the business on sites like Yelp.com and Yahoo.com.”

M Spa needs some positive PR or this could severely hurt the business. What should she do?

I do not think her behavior is defensible. She had other choices in dealing with the situation. Her reaction needs to address her transgressions head on and rectify the situation. If she does not, this could tank her business.

As a friend of mine always says, “you never know who is watching.” In today’s social media world with video smart phones and instant access to the internet, it is even more true.

M Spa needs to get ahead of this.

M Spa is the latest example of how social media can adversely affect a business when simple situations are not handled in a professional manner.
Spa Service
Date Published: 05/28/2013
Customer Service
1

 

 

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Twitter – Is it really that cool anymore?

picture of paul lorinczi - wondering about twitter

Twitter has done some pretty incredible things over the past few years. It has participated in many incredible social movements including the Iranian Green Revolution and the Arab Spring. It has redefined how news get disseminated to people. Twitter users knew about the US Airways plane in the Hudson River than some news organizations. A Pakistani on Twitter was tweeting during the raid on Osama bin Laden’s camp. I will not take any of this away from Twitter. It has been a powerful tool.

After all of those wonderful things, not much of it has changed. The user experience has never been all that friendly. As an “NF” in the Myers-Briggs temperament category, for the life of me, I can’t write something in 140 characters. Abbreviating language to me is akin to Newspeak from the famous book by George Orwell, “1984”. How much more can we dumb down our lives?

picture of paul lorinczi - wondering about twitter

So, it begs the question, have they lost their focus? It seems that when companies start focusing their efforts on how to make money, their original purpose gets lost. Can Twitter honestly say that the user experience is the best it could be after 5 years? There are so many issues with Twitter. The biggest being that users have to “think” about how to use it. My friends over in England that run www.hungarianfootball.com will often do live chats of games for those folks with no access to a broadcast of either a Hungarian league game or a national team game. We can follow them pretty easy, its the other conversations. Yeah…yeah…I know we are supposed to use has tags, but again, using a hashtag requires thought on the users part. The Twitter app on my phone is not smart enough to suggest the hashtag. Why doesn’t it even suggest one?

What made Apple a great company when Steve Jobs was running it was the motivation was to make great products. If you make great products the money will come. The biggest stumble in Apple’s recent history was their maps product. Their motivation was not to create the best map product available, it was to hurt Google’s financially because the iPhone was a big revenue generator for Google. Once their motivation changed, they stumbled. The same criticism can be leveled against Facebook. Now that they have gone public, their focus is on meeting Wall Street’s expectations and not the expectations of their users. Facebook fatigue for sure. After all, what have they done recently? They created a system to mine your data, so they can sell it to marketers and meet Wall Street’s expectations. Has the user experience really changed all that much? No, not really.

I have always said that Social Media is much like Church congregations. Once people get upset with the minister, they will start looking for a new church to attend. While people may not leave either Facebook or Twitter en-masse, they could see active participation numbers start to slowly decline as they continue to down money first path.

 

Is Facebook engaged in Click Fraud?

Forbes has written an interesting report on the possibility that Facebook is engaged in some major click fraud. Eric Jackson is referencing other articles he found regarding what is basically click fraud. Companies are being charged for clicks that are not real visitors, but instead bots. In the articles, the response from Facebook is comical.

Image representing Facebook as depicted in Cru...

Image via CrunchBase

Why am I giving a Facebook such a hard time? Well, their stock was manipulated by the bankers selling it. It just seems that the valuation and power they supposedly have is all artificial. To top it all off, the Ad Revenue could potentially be fraudulent. It’s turning into a smoke and mirrors play.

The bad news in all of this is we may be experiencing the social media bubble that some have predicted.

Here are the articles referenced by Eric Jackson:

Facebook Could be Faking Your Business Out

Do Not Advertise on Facebook Until You Read This

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Facebook stock manipulation watch – all the news here.

paul lorinczi thinking about something
Image representing Mark Zuckerberg as depicted...
Image via CrunchBase

Last week, one of my Wallstreet buddies alerted me to the possibility of the Facebook IPO as being illegal stock manipulation. As the week has gone on, more and more reports have raised questions. If you are following this story like me, it is all over the place.

Forbes

Forbes has put together a good article for the laymen to understand the art of valuation. Like most things in life, it involves “math.” There is a formula that is used to predict revenue. The benchmark most are using is Google. Yet, Facebook is NOT Google. It is a Social Media site. There are more than enough examples of social media services that have come and gone. Let’s see, remember “My Space” anyone?

Business Insider

Henry Blodget at Business Insider has put together a comprehensive accounting of the questionable practices of Facebook and Morgan Stanely. In a nutshell, they helped all their buddies, but left the little investor out of the inside information. As I say to my relatives, if you don’t have the truth, how can you make informed decisions. In the case of the “Muppets” as they are called by Wallstreet insiders, they don’t count.

Reuters

While Mark Zuckerberg is getting married and becoming a billionaire, others are claiming losses of $100 million dollars. The brokers on behalf of their “Muppets” are starting to fight back. This could get messy.

More to come on this topic for sure.

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Facebook stock manipulation – Day Three

linked in stock performance - Facebook stock manipulation?

There is not much that can be added to this story from a lowly blogger like myself. But I can give you some sources that provide more details into what has transpired over the past 3 days.

FACEBOOK Stock has been trading at $32.00-32.78 all day. It is up from its close of $30.00 yesterday.

If you did not see it Monday, there is a great info graphic that allows you to track the stock price.

Facebook infographic - Facebook stock manipulation

Remember Jim Cramer from CNBC?

I hope The Daily Show picks up on this one. Here is a classic quote from a guy that should not be on television:

Any investor who can get shares of the Facebook IPO should purchase as many shares as possible, Jim Cramer said on CNBC’s “Mad Money.”

-Mad Money, CNBC

Aswath Damodaran, NYU’s legendary finance professor who has nailed other stock valuations, has his say on Facebook

In a nutshell, it is overpriced and a risky investment. He is not buying yet, unless he can get it at value.

Last but not least, there are numerous reports everywhere about lawsuits that may be pending against Facebook and Morgan Stanley. Facebook’s response to all of it, “There is no basis for the accusations.” (unless you are blind to the data).

Dealbook reports on pending litigation

Dealbook reported pretty extensively everything that has happened over the course of the past 3 days.

Atlantic Wire scolds us to say, “We Should Have Known About Facebook’s Shady IPO.”

Their article takes us through all the warning signs. Most significant, the bad data was for institutional investors. The ignored data was for the “muppets.”

Unsourced quote from Business Insider, but an insight to Wall street thinking: “The one thing we worried about most ahead of the Facebook IPO was that normal people – “Muppets” they are increasingly called on Wall Street – would gamble on a big pop and lose after getting played by the pros.”

So, why track all of this?

It’s about trust. Ironically, a former Morgan Stanley employee told me during Enron that it was the biggest event to happen outside of 9/11. Enron destroyed the investor trust. The rating agencies were giving them a thumbs up when they were always a thumbs down investment. He said Enron would have major repercussions for the market. He seems to be right. Market manipulation is obviously pretty common now.

If we are going to preach free markets and let the market decide. Facebook’s IPO should have been allowed to let the market decide. I think most people will agree that its value is far less than 28-year-old Mark Zuckerberg would like you to believe.

Now I understand the Occupy Wall Street movement a little better.

 

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Facebook Update

Facebook infographic - Facebook stock manipulation

Facebook Stock closed at $31.00 today.

There are some interesting developments on the Facebook stock story I have been covering over the past few days. Wallstreet Dealbook has reported the following.

As I mentioned yesterday in my previous report on the Facebook question, both the SEC and FINRA are indeed questioning Morgan Stanly, Facebook and NASDAQ. With all the news coming out, questions about the integrity of the market are being pursued.

Image representing Facebook as depicted in Cru...

Image via CrunchBase

As of 2:46p today, the stock is trading down once again at $31.63 down from yesterday’s close at $34.14. It just keeps on dropping. Shares dropped 11% yesterday as investors sold off their stock and the big banks stopped propping up the share price.
Earlier today, Reuters revealed that Morgan Stanley’s, the primary underwriter of the stock, Scott Devitt adjusted his revenue forecast for the stock before the launch of the IPO. Morgan Stanley bankers ignored advice from its own people who advised that demand was being overestimated leading up to the IPO, Wallstreet Dealbook reports. Here is the questionable actions that beg the question of stock manipulation.


Once again, Facebook’s stock was down 6% in early trading and continues to fall as the day goes on.
If the market is not allowed to truly determine the value of a stock, is the value being quoted real?


Have Facebook executives created hype around value that is not there?
This is very possible considering these are the folks willing to buy Instagram for $1 billion and at one time threw out a valuation for Twitter that made no sense too. It seems some investors are waking up and starting to off-load their stock.
Dealbook reports: “It’s a combination of Zuckerberg’s ego for that $100 billion market cap, and the shareholders selling who wanted an exit,” an analyst tells Bloomberg. “Somehow it just missed them that this was mispriced.”
Let’s see where this all goes. Is a social media bubble coming?

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Facebook stock price

linked in stock performance - Facebook stock manipulation?

This is to follow up on my previous post on Facebook Stock Manipulation.

Will it be like Linkedin?

linked in stock performance - Facebook stock manipulation?

Facebook Infographic providing real time stock price

Facebook infographic - Facebook stock manipulation

More to come

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Was Facebook stock being manipulated? UPDATE

Facebook bid chart for initial ipo- marketing, sales and art of persuasion
Facebook IPO -- you provide the data and they ...

There is a chart that was distributed by Twitter user  @bourbon_meyer that demonstrates why Facebook’s stock stayed at $38.00.

It suggests there was some stock manipulation happening. The way to read it is see that smaller bids were run over by massive bids at the higher price. Were the underwriters of the IPO making sure their client’s stock price stayed at $38? Personally, I think Facebook is overpriced and overvalued. You have to wonder if it is not for good reason.

I wonder if the SEC will look into what has happened. It does look fishy.

Even the NY Post is reporting that the big banks bailed out the IPO.

Update:

This story is starting to get more traction. There are firm reports that show how big banks bought large amounts of stock to keep the price at $38.00. The lead bank, Morgan Stanley, who is also the underwriter, bought 64 million shares to prop up the price.

Bloomberg news reported on Morgan Stanley Saturday with details of the stock purchase.

The other question is why was there a glitch in the NASDAQ opening? NASDAQ is claiming a software glitch. There is speculation that FINRA may be opening an investigation. While there are no public reports of this, speculation from industry insiders say this is quite possible.

 

Facebook bid chart for initial ipo- marketing, sales and art of persuasion

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Does negative social media hurt a brand?

paul lorinczi thinking about something

What prompted this question in my mind was a report by Motley Fool that posed the question after the Spirit Airlines refusal to refund a passenger who was too ill to travel. Eventually, the President of the company stepped in and agreed to refund his ticket. He then goes on to provide his excuses for having such strict refund policies. This from an airline that offers cheap fares and then charges you for everything else making Spirit Airlines – the nickels and dimes company.

Spirit Airlines N587NK (an A321-231) lifting o...

Spirit Airlines N587NK (an A321-231) lifting off from Fort Lauderdale – Hollywood International Airport in November of 2009 (Photo credit: Wikipedia)

So, they decided to explore other airline social media debacles and compared it to the airline stock price. According to Molly McCluskey of Motley Fool the answer is no. Even the greatest social media response to service against United-Continental had limited impact on their stock price. There was a 10% drop when the stock was trading at $3.34 a share. Today, it is trading up to $22 a share.

In the case of airlines though, one has to question if it would. After all, capacity is down in the airline industry. Most flights are running with high load factors on most days. So, do people really have a choice in the airline industry?

What about other industries?

Well, the Nestle incident a couple of years did not hurt their stock price or company either. Then again, I am not sure the average consumer really cares that Greenpeace has a problem with Nestle using palm oil in their products. After all, they have a cute bunny selling their chocolate mix.

These incidents have created the pissed off consumer who is going to use social media to get their revenge. We have one client that gets the pissed off person who decides to open up a twitter account, a Facebook page and rants about them not getting something for free. The best advice is to not feed the troll. Take the conversation with the person offline as much as possible. In some cases, they have no impact because no one is listening to them.

Don’t get into an online argument!

Have you ever seen the circular arguments that take place online? I spend a lot of time on www.fark.com. The merry-go-round discussions are religion and politics of course. Consumers can get into merry-go-round discussions online. The challenge is don’t take the bait. As much as you want to tell that SOB what you think, don’t do it. Don’t be the bug in “A Bug’s Life” mesmerized by the bug lamp that just has to fly into it. When you take the bait, you will find yourself on the merry-go-ride.

What do you do? Address it directly and professionally. Most of all, don’t get into a heated exchange.

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Political Marketing: Newt Gingrich is a genius

Political marketing is not something I normally spend time considering. I usually write about business bloggingand make fun of

speaking at CPAC in Washington D.C. on Februar...

Image via Wikipedia

commercials on TV. I have to say, I felt sorry for Herman Cain this weekend. I will admit that I was not too impressed with him as a Republican Presidential Candidate. But, he is kind of getting screwed. How did this guy get harpooned for his infidelities, while Newt Gingrich gets a free pass?

In social media and business blogging, we recommend clients address concerns customers bring up on Twitter or Facebook. You can’t hide from it because people are talking about it. So, just address the issue and be honest. Social media is relentless. People hide behind their online personas to invite their dark side to totally tell someone off. When you address it directly, people tend to back off. I digress here.

How does this apply to Newt Gingrich? If you recall, his marital infidelity was one of the first things that came up in his campaign. He was being scrutinized. His ex-wives were being interviewed. While he was supporting a family values platform, he was cheating and changing wives like underwear. (He’s a Teddy Bear after all) Yet, here we are just before the Iowa caucus and he is becoming the front-runner.

He put it out there at the beginning of his campaign. He addressed it. While he was not and still is not convincing, Herman Cain has fallen on the sword for him. The black guy in the campaign took the issue away from him. Now, Newt’s ideas are being heard and morality of his actions are no longer relevant because he is not Herman Cain. Cain is even going to endorse Newt Gingrich.

I think Newt Gingrich putting it out front helped him. Now, it does not appear to be much of an issue. If he becomes the Republican nominee, I am not sure the Democrats can use it against him. Putting out front was the right move.

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