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Alexis Dormandy: Why Facebook is a pioneer in the word-of-mouth revolution that will change all our lives


Photo: AP

Photo: AP

Photo: AP

FIFTEEN years ago, a book was published called The Truth Machine. It suggests a world in which everyone wears an infallible lie detector, and describes the effect this has on everything thing from crime to job interviews to the inability to tell white lies. Some of these changes are obvious, many of the knock-on effects much less so.

We are about to experience our Truth Machine.

Imagine a world where word-of-mouth was perfect.

Just about everything you buy involves advice from someone you trust. If you’re booking a trip to a new city, you’ll ask “where’s a good place to stay?”, “what should I visit?”, or “do you know a good restaurant?” Whether buying trainers, or hiring someone to work for you, or finding a financial adviser, the biggest influence on you will the word of mouth of people you trust – journalists, experts, friends and family.

The problem is a) that word of mouth currently gets drowned out by the noise of marketers, the biased, the unknown, and the untrusted, and b) it is appallingly inefficient because we have bad memories. You are recommended a great book over dinner; you forget it before you’ve left the room. You receive an email suggesting a restaurant for a date; a month later, you can’t remember who sent it, what they said, or how to find it. You get a tweet suggesting a place to hold a party – it has a half-life measured in hours, not even days.

That’s just first-order word of mouth: someone tells you something, you forget it. How about passing information from one friend to another to another. A friend tells you about a great hotel in Madrid, unless you’re a lot more efficient than anyone I know, the chance of you passing it on to another friend, just before their trip to Spain, is approaching zero.

Now imagine that word of mouth was perfect. Everything I know and trust, I share. My friends can access it and automatically pass it on – what Facebook calls "frictionless sharing". And that information can bounce from person to person in seconds. In a world of six degrees of separation, that world suddenly works in a very different way.

In a world of frictionless word of mouth the best products get known about very very quickly. Every purchase is made with the benefit of highly trusted advice. Finding a builder, trying a new restaurant, buying a gift for a child, choosing a gadget, visiting a new town. All of them easier to find, more reliable, more fun, and better value.

The biggest effect would not even be to consumers. Commerce would be transformed. If the best product is instantly known to consumers, then the entire focus of a business becomes building the best products. (I know they claim it is now, but it’s not). The winning company isn’t the one that controls distribution, or the one with the biggest marketing budget, or the most cut-throat sales technique – it’s the one with the best product.

That means different people run these companies – product designers are not sandwiched between marketing and IT, they run marketing and IT. The product manager becomes the Chief Product Officer, they sit on the board, they run the company (interestingly, that’s they way Apple has been run for years).

Retailers have access to this information, so they stock the things they know customers will buy. That means billions and billions of savings from reduced wastage and quicker turnover of products. Investors will make fortunes from understanding which products will win, rather than waiting to see their accounts after the event. Bankers will need to understand customers as much as spreadsheets.

The brightest people will be trained to develop creative skills – to listen and understand what customers want, and develop unique solutions to customer problems, rather than just learn how to make money out of them.

We will buy more – if there’s less risk to each purchase and we get better value, then we’ll do more new things, more often.

The word-of-mouth machine hasn’t (quite) been invented yet, but the platforms that underlie it have. The biggest is Facebook. If you’re getting bored today with stories of social media, tech bubbles, and multi-billion-dollar valuations, imagine a world in which the best products, services and people are discovered, shared, and validated around the globe, in seconds. And imagine being a shareholder in the company which enables, collects, and commercialises that.

Facebook may not win. The change we will see in the next few years will be more fundamental than the arrival of the internet in the first place. And it is incredibly early days. But the winners in this new world will make a lot more than $100bn, and if you had to pick a winner, Facebook understand the issues better, they have more money, and most importantly, by nurturing The Hacker Way, they remain unbelievably quick at designing, developing, launching, testing, and improving their products.

The word-of-mouth machine will arrive in the next few years, and it will change the world. It will enrich consumers lives, and promote the best products, not the biggest companies. It will also change the way businesses are organised, run, and make money. It will change the way people are trained and educated, and ultimately the way capitalism works. I wouldn’t mind owning shares in that.