Evan Schuman's StorefrontBacktalk

Many major retailers have been criticized for being slow to adapt to industry—especially Web-based—changes. But it’s not hard to see why when we see how the industry treats e-tail pioneers such as Amazon and Facebook.

To be fair, both Amazon and Facebook got spanked for going too far in respectively testing copyright and privacy limits, and both firms likely merited it. And both firms quickly retreated. The specifics here do not indicate a major inappropriate reaction, but the pattern is discomforting.

For companies to lead the industry and stake out strong global positions–especially in a weak economy—requires bold action. That means being aggressive at times to see how far consumers and competitors will permit them to go. Standup comedians trying to become successes don’t get anywhere by sticking with safe material.

Let’s look at precisely what these two players did.

Amazon Gets Creative

On Friday (Feb. 27), Amazon issued a statement that it was reversing an experimental text-to-speech feature after quite a few people in the publishing industry screamed bloody murder. (“Holy Catastrophic Copyright Calamity!” shrieked sidekick Robin to publishing superhero Bookman. “Quick! To the BookMobile….”)

The Amazon statement literally opened with this classic line: “Kindle 2’s experimental text-to-speech feature is legal: no copy is made, no derivative work is created, and no performance is being given.” Yep, PR Rule 152 clearly states that if the first sentence of a media statement has to declare that a new service is technically not a felony, it’s probably going to be a long day.

Amazon’s statement said that the company was pushing text-to-speech for many titles, but would step back and limit it—for now—to those publishers and authors who want to cooperate. (A cooperative publisher? I thought those just existed in Aesop’s Fables or something.) Spoketh Amazon: “Nevertheless, we strongly believe many rightsholders will be more comfortable with the text-to-speech feature if they are in the driver’s seat.” Like they needed some consulting firm to tell them that.

But the serious point is that Amazon is trying to work with text-to-speech and see how it might take book sales to the next level. Arguably, when the recession smoke clears, Amazon may be one of the only major booksellers left. Book publishers, left to their own devices (most likely a World War I era Underwood typewriter and abacus), are not much more likely to embrace change than their newspaper cousins have been. It’s going to be up to booksellers such as Amazon to push publishers—dragging and red-lining all the way—into the new world order, which may be publishers’ only shot at long-term survival.

If we’re going to need retailers like Amazon to be creative and adventurous for the industry to survive, we need to cut them a bit of slack when they make mistakes. Fear not: They will make—and have made–plenty of mistakes. If they didn’t, they’d be stagnant and ineffective, but there’s no need to drag Borders and Starbucks into this.

On The Face Of It

Facebook’s situation is surprisingly similar. I say surprisingly because, despite Facebook and Amazon being radically different types of companies (social networking and retailer) dealing with remarkably different issues (copyright versus privacy), what they did and how they reacted—and how the industry then reacted—were quite similar. Both tried new tactics in relatively uncharted waters; both quickly realized the depth of the stupidity and insensitivity of the move; both publicly apologized and reversed the changes; and both were pummeled for it. If we don’t encourage experimentation, the industry is in serious trouble.

It could be argued that Facebook is almost as much of a pioneer in its space as Amazon is in its. Although Facebook arrived a lot later to the Web party, it has proven quite agile in the social media space, an area that retailers need to understand a lot better. And Amazon knows fully that it’s not much of a reach to envision what Facebook and its MySpace arch-rival could do retail-wise if either firm truly opted to master the data and relationships each already has in place. That is precisely what Facebook is trying to do.

The company is not trying it today, but it is trying to lay the foundation for such a move a couple years down the road. To do that will require privacy changes and a different kind of data collection, which brings us to Facebook’s “I’m so sorry that I promise to not do it ever again unless I’m confident you’re not looking” moment.

Facebook today still runs a very distant second to MySpace, but it’s catching up. As of January, according to Hitwise, MySpace had a 57 percent social networking share, compared with Facebook’s 31.1 percent. That’s a snapshot, and it looks good for MySpace. But put a little more context into that data and the picture is clearly trending to Facebook. That 57 percent from January 2009 is a huge drop from the 72.5 percent MySpace had just a year ago (January 2008), and it’s even a healthy (or, in this case, unhealthy) drop from the 60.6 percent it had just a month earlier (December 2008). At the same time, Facebook’s 31.1 percent marketshare is more than double the 15 percent it had in January 2008, and it also registered a substantial increase from the 27 percent it had in December 2008.

Add up all those numbers and it’s clear that Facebook is a social media player to watch. In the meantime, though, the company is plotting the future and realized that its privacy policies weren’t nearly as abusive as they could be. Nobody reads ‘em anyway, execs thought, so why not let the lawyers have a little fun?

Facebook Tries To Master Its Domain

The new rules said that Facebook owns all content on the site, even after a consumer removes it. Facebook heard the backlash and quickly reversed itself. That wasn’t the first time, either. But Facebook wasn’t done yet.

Last Thursday (Feb. 26), company CEO Mark Zuckerberg said he had learned a lesson and that new Facebook rules (officially called The Facebook Principles and the Statement of Rights and Responsibilities) would be “subject to a vote, which may include other alternatives. The vote will be open to all Facebook users active as of February 25, 2009. The results of the vote will be made public and will be binding.” Had he stopped there, it would have been perfect. Let the customers (who aren’t paying anything, but still) vote on this stuff. Then if something happens later, how angry can consumers get if their peers—and perhaps even themselves—had supported the move? Besides, it’s not that dangerous. How many Americans really read the referendums and questions they vote on at the polls?

But, of course, CEO Zuckerberg didn’t leave it at that. He said the results would be binding only “if more than 30 percent of all active registered users vote.” AP crunched the numbers: “If more than 7,000 users comment on any proposed change, it would go to a vote. It would be binding to Facebook if more than 30 percent of active users vote. Based on Facebook’s current size, that would be nearly 53 million people. By comparison, a group created to protest Facebook’s new terms has roughly 139,600 members as of Thursday.”

That’s not a bold move to empower consumers. It’s a cheap display of theatrics—and cheesy theatrics at that—to make it sound like you’ll accept the customer’s will when it really gives Facebook carte blanche to do anything it wants under the façade of being more open. Consumers are not that dumb (actually, they are, but let’s not go there). This scenario has got all of the makings of a massive backfire disaster.

Even worse, that sentence can be interpreted to mean that if 30 percent of active users do not vote, any changes would not only not be binding but they wouldn’t even have to be made public. You think 53 million people are going to even know about the vote, let alone make the effort to participate?

It wouldn’t be so galling if Zuckerberg hadn’t tried to make Facebook sound egalitarian when it was actually being Machiavellian.

“We’re honored that so many millions of people around the world have decided to bring Facebook into their lives to share information and experiences with friends and loved ones. We understand that gives us an important responsibility to our users,” Zuckerberg wrote. “History tells us that systems are most fairly governed when there is an open and transparent dialogue between the people who make decisions and those who are affected by them. We believe history will one day show that this principle holds true for companies as well, and we’re looking to move in this direction with you.”

Why is it that when CEOs use the word “principles,” it’s usually in a context that demonstrates that the principles they truly have are not ones they should be bragging about?