“A prince is revered when he is a true friend [or] a true enemy.” Thus, Machiavelli, who is usually right. If one wishes to remain in power, one must choose between one course and another, between good and evil, (to paraphrase), but “[one] usually take[s] the middle course, that is most destructive.” I never understood why Machiavelli is not mandatory reading in business schools; there is a wealth of practical wisdom in his works, especially if these are not taken at their purely superficial meaning. In the selected passage, the subject is not morality but rather clarity, constancy, dependability, and execution. Bearing witness to the privacy mess in which Facebook now finds itself embroiled, I am reminded.
A good summation of the issue is laid out in Fred Wilson’s recent article, Privacy and the Treacherous Middle Ground: ”I’ve always thought that in the venture capital business you either want to be very early or very late but not in the middle. I’ve also thought you either want to be a boutique with a few investors or an institution with many, but never in the middle with the bureaucracy of an institution but without the scale. And I think privacy is like that. You either want to be totally public or totally private, but never sort of private and sort of public… That middle ground is treacherous.” Yes, it is, per Machiavelli, and Facebook does seem bent on this murky and middling path. What’s worse, Facebook is not overtly clear in its intentions, and this inconstancy is beginning to alienate the fans.
Facebook is not alone. Google, for whom Facebook appears (at times) to be gunning, has charted a murky and middling course of its own. (By the way, Google’s slogan, “don’t be evil,” is not the same as to say, “be good”: a distinction that bears noting in the context of Machiavelli’s murky middles.) Trying to identify a path that is not solely reliant upon its flatlining search business, Google has dabbled with everything from social networking (wherein privacy, unlike in search, is critical) to smartphones (wherein marketing and design, unlike in search, is the primary driver). Certain missteps – that are to be expected in unfamiliar terrain, when catering to numerous disparate bases – may undermine Google’s credibility.
The list of Internet middles and scattered shots goes on: from Twitter trying to build a business model that is somewhere between search and messaging, to Zynga trying to build a distribution platform that isn’t reliant on Facebook but doesn’t miss out on 500 million users that the latter can access, to AOL trying to build a premium content solution based on search traffic that is by definition commoditized, to the assortment of advertising networks and exchanges that now intermediate between each other. What these examples underscore is that the dreaded middle is more prevalent in digital media than an isolated Facebook story. Indeed, the segment may generally be undergoing a phase of neither fish nor fowl, as it were, not due to any misdirection in particular, but as a matter of evolution.
The Internet has grown out of its initial stage of playfulness and experimentation, but is not yet at the point of maturity – where terms and conditions, principal competitors, boundaries, will have been etched in stone. (Many of the key players, however, must nevertheless support valuations that necessitate growth and nimbleness increasingly difficult to maintain as they grow, and as sector maturity nears.) We are not at that point yet – we are, as has already been said, in the middle – but we may soon get there, and the Facebook situation is a case study.
It is no wonder, then, that in this state of affairs the outliers – the straight shooters, if you will – are noticed and rewarded. Examples include ventures like Groupon - most recently valued at $1.2 billion after less than two years of operation – and Gilt Groupe - which has likewise raised additional capital recently, after a similarly short existence, at a rumored $400 million valuation. These are companies with clear business models and value propositions, for whom the road to large profits is not only visible but easy to grasp. And although we don’t think of Apple as a venture, the company derives much of its success (in a dynamic field) to simplicity and clarity. We all understand the company’s profile, its revenue sources and growth prospects are easy to explain. Apple’s market capitalization exceeds that of Google for a reason. In the land of the middling, the constant and concise is king.
