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Wednesday, January 30, 2008

How Facebook is like IKEA

12:24:00 PM Posted by Oscar Berg No comments

As kind of a follow-up on my previous post, here are some excepts from a recent article from "Slate - the undercover economist" by Tom Harford called "How Facebook Is Like Ikea - They get their customers to do the work—and to enjoy doing it":

"I'll admit that the similarities are not apparent at first sight. But a defining idea behind Wikipedia, Facebook, and blogging platforms such as WordPress is that if you give people the right tools, they'll use them to create wonderful things in collaboration with each other or with the organization that provides the catalyst."

"Ikea's success is not so very different. Ikea keeps its costs and prices low by enlisting its customers—their time, their cars, their ambitions as interior designers, and their inflated ideas of their carpentry skills."

"Management experts Rafael Ramirez and Richard Normann pointed this out in the Harvard Business Review back in 1993. Ikea, they argued, was a success because it enabled "value co-production." This infelicitous term partly refers to offering consumers a discount to build their own furniture. But it means much more: Ikea recruited its customers to the idea that they could not only put up shelves, but also design their own stylish living spaces"

"Facebook, like Ikea—and like Microsoft—has mobilized an army of independent suppliers. In Facebook's case, they are developers who produce applications that can be plugged into the Facebook platform. In all these cases, the idea is the same: If Facebook (or Ikea) can woo the customers, independent suppliers will be queuing up to help, and if the independent suppliers are queuing up, Facebook (or Ikea) should be able to woo the customers"

Personally I believe this comparison is interesting as such. But, comparing Facebook with IKEA when it comes to business success is a sign of "dotcom-blindness". I get the same vibes as I got when venture capitalists expected Boo.com to sell more fashion wear via the Internet than the entire fashion industry in the "old economy". I just couldn't understand how that wasa going to happen, even if there was a "new economy". And I don't really understand the business model of Facebook and how that is going to deliver sustainable value over time. IKEA:s business model is much more reliable since people will always need and pay themselves for beds and other things to furnish their homes, especially those who offer the best balance between price and quality. But what happens when advertising revenues drop for Facebook, which might happen as we now most likely are heading into a recession as companies need to cut their marketing expenses? Will Facebook try to charge their customers for their services, a business model that has already proved to be unsuccessful? Maybe there's a "new economy" business model that I just don't know about and that will come to rescue.

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