Facebook’s ‘Inflated’ Metrics

Today’s Highlights: How to run a business on Instagram. Online home-buying has a moment. And can you build a startup inside a corporation?

OPPORTUNITIES

In the pandemic, online home-buying has taken off: “The increased pressure on the market has been coupled with widespread adoption of tech tools that allow buyers to not just browse real estate but also apply for loans, finalize deals and even have documents notarized, all while social distancing from their sofas. Sixty-three percent of buyers who used Redfin in November and December went on to make an offer on a home they hadn’t seen in person, and monthly views of 3-D walk-throughs on the site are up more than 500 percent since February 2020.”

  • “‘In this market, because the homes are gone so quickly, if I had contacted the agent and set up a showing, by then they could have had five other offers,’ Ms. Horton said.”

  • “Zillow, which reports that traffic to its for-sale listings jumped 41 percent in 2020, found in a July 2020 survey that 36 percent of Americans would be more likely to buy a home entirely online.”

  • “DotLoop, a remote signing and notary service that Zillow acquired in 2015, has been one of the biggest pandemic sleepers.” READ MORE

MARKETING

For years, according to a new lawsuit, Facebook gave small-business advertisers "inflated and misleading" metrics on how many people their ads could reach: “The documents, unsealed on Wednesday by the U.S. District Court for the Northern District of California, cite emails from a Facebook employee saying the company received ‘revenue we should have never made given the fact it's based on wrong data.’ The lawsuit alleges that the problems with the metric, known as potential reach, were ‘largely due to fake and duplicate accounts,’ but Facebook chose not to remove those accounts. According to internal documents cited in the lawsuit, the product manager suggested changes to potential reach that would have decreased its numbers, but Facebook managers rejected the idea because the ‘revenue impact’ would be ‘significant.’”

  • “The lawsuit, originally filed in 2018 by a group of small businesses, cited internal emails in which Facebook COO Sheryl Sandberg acknowledged as far back as 2017 that she had been aware of the problems with the metrics for several years.”

  • “‘These documents are being cherry-picked to fit the plaintiff's narrative,’ Facebook spokesperson Joe Osborne told CNN Business, calling potential reach ‘a helpful campaign planning tool that advertisers are never billed on.’” READ MORE

Can’t live with them, can’t live without them. Here are some tips for running a business on Instagram: “Puccini says that answering direct messages ‘put her on the map.’ She found this strategy by accident after reaching out to an account that repeatedly liked her posts. The account belonged to a wedding planner in Connecticut who became her first client and continues to work with her today. Puccini says 17 of her total 26 custom gift box clients have come directly from Instagram messenger conversations. Puccini handles these custom clients' gifting year-round, and their repeat business makes up 68 percent of her revenue.”

  • “Online marketing educator and business coach Sue B. Zimmerman advises using Instagram's ‘quick reply’ to respond to a large volume of messages. You still need to reply to each message directly, but this shortcut allows you to reply with pre-typed responses for common requests and questions.” READ MORE

RETAIL

An upscale, organic grocery has become L.A.’s hottest hangout: “Last year, after the coronavirus pandemic forced bars and nightclubs across the city to shutter, supermarkets were among the few places where people could still see and be seen. Erewhon, with its outdoor dining areas, became the unofficial hangout for the young, beautiful and bored. Like a moth to a nontoxic flame, the store drew Instagram flâneurs in droves — but also plenty of grimaces and eye rolls from locals.”

  • “The store seems tailor-made for today’s influencer culture. Its fastidiously curated assortment, where foods are lit like fashion editorials and are often some combination of organic, gluten-free, biodynamic, free-range and vegan, makes it ripe for snarky quips.”

  • “It’s been profiled in Vogue and Vanity Fair, and tweeted about by Kanye West.”

  • “In December, mask-less protesters stormed a location, seeing it as the very manifestation of liberal values.” READ MORE

HUMAN RESOURCES

Gene Marks says he has a client—a lifelong Republican who owns a manufacturing business with 100 employees—who favors increasing the federal minimum wage to $15: “My client’s business depends on hourly workers. It is located in New Jersey, where the state minimum wage is already $10 per hour ($2.75 higher than the national level) and slated to go up to $15 within the next three years. Like the business owners there—and other states bracing for similar increases—he’s struggling to adjust his cost structure. He has to do this because he’s at a serious competitive disadvantage. That’s because most of my client’s competitors aren’t located in New Jersey. They’re located in Alabama, Georgia, Idaho, Indiana, Iowa, Kansas, Kentucky and Louisiana. Or Mississippi, New Hampshire, North Carolina, North Dakota, Oklahoma, Pennsylvania, South Carolina, Tennessee, Texas, Utah, Virginia, Wisconsin and Wyoming. These are all the states where the minimum wage is equal to the federal $7.25-an-hour level.”

  • “My client has no choice but to charge higher prices for his products in order to make a profit. This is an enormous challenge.”

  • “Is it fair that they must pay more for their employees when their American competitors in other states pay so much less?” READ MORE

STARTUPS

A co-founder of Waze, which was acquired by Google, says it’s impossible to build a startup within a corporation: “We assumed we would get jacked up distribution for our app through Google, basically the best of both worlds—speed and culture of a start-up and financial backing and distribution of a corporation. ... I was the naive start-up leader believing that I can build out Waze within Google to its full potential and conquer the beast, regardless of its nature.” Here’s what happened:

  • “We began onboarding people with the wrong state of mind—seeing Waze as a stepping stone and not as a calling.”

  • “It is practically impossible to fire someone for the basic reason that you don't need this role any more or there is a better person out there or just plain old ‘you are not doing a great job.’ This neuters managers and does not lead to great teams, driven by mission, pushing each other to do better.”

  • “We quickly learned, the hard way, that we could not get distribution from Google. Any idea we had was quickly co-opted by Google Maps.”

  • “Today, in Silicon Valley, work life balance has become sacrificing Work for Life—not a balance. Young people want it all—they want to get promoted quickly, achieve economic independence, feel fulfilled at Work, be home early, not miss the Yoga class at 11:00 am etc.” READ MORE

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OFFICE SPACE

WeWork is slashing prices across the country: “The New York-based company reduced the price of most rental units—from individual desks to small offices—in early November and again in January, according to data compiled for Bloomberg by an independent researcher. The average price reduction overall was about 10 percent, the data show. Some locations declined by as much as 25 percent.”

  • “Office rental prices across the country have been dropping precipitously. In the largest American cities, fewer than 20 percent of office workers were back at their desks as of the end of last year.”

  • “Landlords’ asking prices could drop by 7 percent by early 2022 before rebounding, a forecast from CBRE Group Inc. shows.” READ MORE

LOGISTICS

Now supply chains are being affected by a shortage of shipping containers: “It has rarely been more expensive to move sugar, coffee and copper around the world by sea. Ocean freight rates began to soar last summer, and haven’t let up. That is partly because consumers, unable to spend money in restaurants, have splashed out on goods that move by sea. Retailers and manufacturers, meanwhile, have rushed to rebuild inventories. The shortage of 40-foot steel shipping containers has snarled global supply chains for commodities, hiking prices for some raw materials.”

  • “So far, there hasn’t been a big increase in consumer prices.”

  • “Health precautions and coronavirus cases among workers have slowed the flow of boxes through ports, reducing the pool of available containers.”

  • “Dozens of cargo ships are queuing to discharge at the ports of Los Angeles and Long Beach.” READ MORE

THE COVID ECONOMY

New Yorkers can dine inside once again, but are they ready to do so? “In the few days since indoor dining restarted, customers appeared to be trickling in but usually in modest numbers, and interviews with owners, workers and industry experts suggested that many people were still leery of being inside. In fact, allowing restaurants to open their doors to patrons at 25 percent capacity is unlikely to be enough to significantly reverse the economic damage that has already been inflicted, industry experts said.”

  • “The restaurant industry, one of the city’s most vital economic pillars and a key to its recovery, once employed 325,000 people. It has shed more than 140,000 jobs.”

  • “By comparison, during the worst of the 2009 economic downturn, restaurant traffic fell just 3 percent.”

  • “‘There’s no end in sight, and people have lost their livelihoods,’ Mr. Rigie said. ‘It’s about managing risk. There’s no perfect solution.’” READ MORE

OPINION

Ghost kitchens are NOT the future of restaurants: “Ghost kitchens are constantly billed as the next great restaurant innovation, an idea that first took hold well before the pandemic, and then really dug its claws in once the industry fell apart and potential customers grew accustomed to going days without leaving the house. Ghost kitchens have been meticulously engineered to be infinitely adaptable and fantastically efficient. The Wall Street Journal loves them. But what they really are is a trend that manages, triumphantly, to strip away all joy from the act of eating. They are devoid of every feature that makes restaurants great, and they are not, despite what the many, many headlines say, the true future of the restaurant industry.”

  • “What ghost kitchens are not, as should be clear by now, are restaurants. They are food-logistics operations ...”

  • In 2013, Green Summit Group launched a ghost kitchen in New York, burned through ‘hundreds of thousands of dollars a month,’ and then shuttered in 2017.”

  • “Maple, the David Chang–backed restaurant-food-without-a-restaurant startup failed, West Coast–based Sprig and SpoonRocket failed, as did Munchery.”

  • “Delivery is not good. Delivery is, at best, okay.” READ MORE

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THE 21 HATS PODCAST

Episode 49: How Do We Get Out of This Cage? This week, Karen Clark Cole, William Vanderbloemen, and Laura Zander cover a lot of ground: What do you do when the to-do list seems endless? What do you do when employees decide they want to work remotely from random parts of the country? And Laura is confronting several big, interrelated issues. Her co-founder and husband, Doug, is ready to step back from the business. That’s a little tricky because the company operates off a 19-year-old platform that Doug built, and only he knows how to make it work. They’ve been trying to hire tech people for Doug to train, but they’ve been through 15 people in 10 years—and they know they’re doing something wrong. Do they need to hire a recruiter? Is it time to junk the legacy platform and go with Shopify? If they do that, will they forfeit 19 years of SEO value? All of which has left Laura feeling trapped. “That’s this cage that we’re in,” she says. “What the hell do you do?”