By Doug Stephens
If you saw the movie The Social Network, then you may remember the scene where Mark Zuckerberg’s character, says to his business partner, that the reason people join Facebook is because it’s cool. He insists that by allowing advertising, Facebook would lose its appeal.
The decision to ignore the lure of quick revenue from pop-up and banner ads in favor of creating something truly unique and remarkable was perhaps the most pivotal decision on Facebook’s path to success.
In a similar kind of leap of faith, Starbucks has just announced the launch of its free in-store Wi-Fi content network. It’s a rich multi-media experience consisting of news, entertainment, professional networks, local content, community information and free applications. And according to sources involved with the project, not a single dollar has changed hands in the development of the service. Not between Starbucks and its partners and not between the consumer and Starbucks. No revenue. No money.
The Problem With Money
If ideas are like water, money is like molasses. Ideas not only move more easily and quickly than money, they are infinitely more collaborative. Sharing ideas is exciting. Sharing money is anxiety inducing. And nothing can slow an idea down faster than the dependence on money for its survival. Money can limit the creative boundaries of an idea and in some cases even kill it. This is particularly true at the front end of a project, where concepts may be sketchy and payoffs unclear. This is where money moves the slowest.
A myopic focus on R.O.I may produce a sufficient product but will rarely result in the coolest product.
So in both examples above, Facebook and Starbucks, by unshackling the ideas from the money, the focus can shift from delivering short-term R.O.I to creating a superlative product or experience that people simply love.
From Transactions to Transformations
Had Facebook opted early on to look for revenue from advertisers, it’s impossible to say what those transactions may have amounted to. What is clear is that by resisting the pressure of R.O.I., Zuckerberg created something transformational and in the process forever changed the way society shares experiences.
Half a billion users later, Facebook is every marketers dream and every investors pipe dream.
The New Business Model
Conventional business wisdom says we should look for a reasonable and quick return on investment when we enter into a project. But the new business model defies that thinking. In the new business model, the return on investment may far exceed all expectations or reasonable scale, provided we don’t look for it too quickly. Put differently, if we look for a fast ten percent on our investment, we’ll likely never develop the idea that produces a ten thousand percent return.