Friday, April 30, 2010

The curious potential of Chatroulette

Despite all the waving body parts of Chatroulette, I keep thinking how unbelievably great this platform could be for fostering interesting interactions between strangers. Check out this video:



Edgier brands are already finding ways to market their brand on chatroulette.

I can see all sorts of ideas around games in chatroulette space, spreading the word on a cause one person at a time, brainstorming with like minded groups if you could just chat with people who are tagged with an interest, like "Dr Who" or "The Monster Raving Loony Party." Imagine chatting with people at a conference. Demo'ing products. Providing crowdsourced customer support. Think about Good Samaritans -- help strangers who are feeling down.

And want to get really scary? How about live TV that includes "let's hear what random people think about XYZ?" A whole new spin on reality TV. Could be ads you run with the results. How about customer surveys? "Hey, I'm with such and such brand, what do you think about ...?"

Interesting. Can't wait to see what happens.

Wednesday, April 21, 2010

The Secrets of Apple's Marketing

We can only all dream of being part of a marketing dream machine like Apple, Inc. Today, I was forwarded an interesting PDF written by Steve Chazin. You can find the PDF (and hire Steve!) yourself here: http://www.marketingapple.com.


Here's a summary of the secrets. But read it yourself too!

1. Don't sell products. People buy what other people have. Make it easy for people to sell your product for you. With Apple, it's a lifestyle not a product thing. You want to dance like someone with an iPod.

2. Never be the first to market. Make something good greater. Improve the world. Fix something that already exists on the shelf. Focus on the one thing you do better than anyone, and make that matter.

3. Empower early adopters. Encourage and share real user's unbiased, heartfelt reporting. Help them market for you.

4. Make your message memorable. Boil it down to its syrupy goodness. Think big. Write small. Work on a tight, memorable message.

5. Go one step further. Surprise and delight your customers. Focus on the feel. What's your equivalent to that beautiful Apple un-wrap experience?

Monday, April 5, 2010

My first weekend with the iPad

So naturally I was waiting in line for the Apple store in Palo Alto to open so I could get my Kindle immediately! Back in October, I was already planning this. The verdict? While I could live without one, I definitely don't want to. And certainly my family won't want to!

Photobucket

Sophie trying out the iPad in Starbucks

It was a family affair:
  • My kids downloaded Scrabble and various Tap Tap games.
  • My husband played a good number of games of Solitaire.
  • I read the New York times -- app isn't nearly deep or rich enough. Why cut out all that content?
  • I watched movies on the fab Netflix app -- though the screen is so mirror like I kept seeing my face in it. Didn't like that -- and it's hard to watch with more than one person.
  • I watched part of a TV show on the ABC Player.
  • I downloaded one or two books, but I can't see doing a lot of reading on this.
  • I accessed my Kindle library on the Kindle app. A definite improvement on the Kindle experience. But where is the ability to annotate?!
  • My husband played with the Weather Channel map and talked endlessly about where the snow was falling (and therefore where he should be skiing.)
I can really see this as a terrific travel device. It's so, so much easier than carting around a laptop. If you're not planning on a lot of work that involves typing, then it's just right.

It's not a device for sharing with others, unless you're playing a game of some sort. Even then, it's crowded for two.

Buy some really good screen cleaner and a soft cloth of some sort. Greasy finger marks show up easily.

Thursday, March 25, 2010

Millennials: Confident. Connected. Open to Change.

Reviewing the Pew Research Center Report "The Millennials: Confident. Connected. Open to Change." (I know I don't need to tell you that the Millennials are 18-28 year olds.) As this audience represents the vast majority of the people I "talk" to and about every day at Loopt, as well as at other companies, it's worth drilling down on what makes this generation tick.

This is a generation of adults that are confident, self-expressive, liberal, upbeat and open to change. They are less religious, more racially diverse, and on track to become the most educated generation in American history.

Here are some identifiers:
  • 8 in 10 sleep with their cell phones by their bed.
  • Nearly two-thirds admit to texting while driving.
  • Three-quarters have a profile on a social networking site.
  • One-in-five have posted a video of themselves online.
  • Four-in-ten have a tattoo -- about half have two to five, and 18% have six or more. (70% say their tattoos are hidden beneath their clothing.
  • One-in-four have piercings in a place other than their ear lobe
  • Most have placed privacy boundaries on their social media profiles.
  • 37% are unemployed, or out of the workforce; but 90% say they have enough money or that they will eventually meet their long term goals.
  • Two-thirds are cautious about dealing with other people -- is the "war on terror" and other fear-mongering making this generation just less trustworthy and more cynical about their fellow human beings?
  • One in four say they don't belong to a religious affiliation, but that doesn't mean they don't "believe" -- just as many pray as their elders did in their youth.
  • Six-in-ten are raised by both parents.
  • One-in-five are married.
  • One-in-eight were 'boomeranged' back into their parents' homes due to economic circumstances.
These stats are interesting. They represent facts. You are either married. Or not. Tattoo'd. Or not. But what's even more interesting to me is their self-perception. When this generation were asked what makes their generation unique, they answered:
  1. Technology use (24%)
  2. Music/pop culture (11%)
  3. Liberal/tolerant (7%)
  4. Smarter (6%)
  5. Clothes (5%)
You can read the report to see how other generations perceive themselves. Also fascinating.

The whole report provides validation for what I see every day. That the Millennial generation is the one that leads the rest of us into new forms of behavior and new technology use. From Facebook to Texting to Chatroulette. Older generations who ignore what Millennials are doing, especially in the technology arena, do so at their peril. Accept, learn, and embrace. Some of it is crazy. All of it is truly fascinating.

Wednesday, March 17, 2010

Tracking buzz with Viralheat

I'm a little bit loving Viralheat right now.

Viralheat will search the online world for mentions keywords, phrases, and brand names you choose. I'm fairly new to it, but I like the way it gives me charts so I can see the up and down moves in search terms so I see directly buzz increasing after a particular campaign.

My favorite part? The price! I'm just trying it out on the $9/month package right now. I'll move that up if it works out. But seriously. Most startups can't even consider the hundreds of dollars a month for fabulous stuff like Radian6. I wish I could. Honestly do. But it's not realistic.

Thursday, March 11, 2010

Developing a social media strategy

Millions of bytes of information already exist out there covering how to approach building a social media strategy. Few come with the street cred of Charlene Li and Jeremiah Owyang.

Check out this excellent article "Developing a Social Strategy." Step through the slides. Key takeaways:
  • First listen and learn
  • Engage, but focus on sharing and watching
  • Look at ways to support your customers and help them solve their problems
  • Engage your customers in your innovation -- what are their ideas?
  • Start small, focusing on one business goal where social media can have an impact -- and gauge success by how well you reached the business goal
  • Practice and preach openness -- this takes courage!

Their follow on "Understand Your Customers' Social Behaviors" is also worth a look. Their report focuses on how it's important to conduct research to identify the social behaviors of your customers before you do anything. For example, identify:
  • Where customers are online (use surveys, brand monitoring)
  • Who customers trust (surveys)
  • Who customers influence (surveys, brand monitoring)
  • How customers use social tools in the context of your products
Once you understand, the plan can be built.

Tuesday, February 16, 2010

Don't buy users until you're ready

I was thrilled to read this article on Business Insider with advice from Sachin Agarwal "Three Things Your Startup Should Put Off As Long As Possible."

My favorite advice? Do not buy users until you have determined your Lifetime Value of your user, and you have Customer Acquisition Channels with direct costs above zero.

Seriously. Too right. I'm so often asked for customer acquisition plan advice. My response is always to start with SEO and partner marketing. Don't go down the route of buying users until you can measure they are making you any money, you can measure exactly how they are converting, and you can do organized A/B testing. Usually early phase startups can't do any of those things. Estimates are just guesses until you have real data.

Focus on building a fabulous product, with great content, and every possible viral link to allow your users to share the love.

Thanks, Sachin Agarwal for words of wisdom.

Monday, January 11, 2010

I miss my vinyl albums

I was reading this article from Digital Music News today "Recording Industry In 2009: Albums Down 12.7 Percent, Digital Still Gaining" that reports vinyl LP sales in 2009 were up 33% to 2.5 million.

What's that? Vinyl LP sales? Really?

It got me thinking. You know what's missing in listening to music today? That tactile experience of opening an album and placing the LP carefully on the turntable, being cautious only to hold it by the outside edge. Maybe cleaning first. Maybe blowing the dust off the needle. Then after that first crackle and hiss, sitting on the sofa, having a ciggie and a cup of tea (I am English after all), and studying the liner notes. It was all such a ceremony.

We worshiped listening to music back then. It was such an effort that you had to stop and listen carefully. Today it's just too instant and easy.

Sorting out my digital viewing

With all these tasty announcements from CES of my future TV viewing toys, I amuse myself by looking at the utter muddle of my own TV viewing life. Let's see I have;

* A Netflix account; they love me at Netflix. I lose so many DVDs (which I always pay for) and then forget to return said DVDs for weeks on end.

* A 58" Samsung TV in my family room with all the toys (widgets and so forth) with utterly crappy YouTube videos, hooked up to a TiVo. But most TV channels are such abysmal quality (both content and resolution) that I can't bear to watch any of it. Only a few are HD, and I can never figure out the numbers of those channels.

* Another 58" Samsung TV to watch in our playroom, where my treadmill resides, hooked up to Comcast's DVR. What is going on with that device's user experience? I feel like I'm in the DOS of the 80s. Absolutely, utterly dreadful. Beyond dreadful.

* A nice "little" 30-something inch TV in my bedroom with a Boxee experiment managed by my dearest partner. This experiment involves a MacMini, a breadboard with a mouse on it, and a keyboard, both tucked into the sock drawer underneath the TV. I haven't used this Boxee yet to do anything meaningful. Every time I try to play something back on it, I have to wait for it to load and I get bored. I'm never in the room long enough. Also, it makes strange noises in the middle of the night and wakes me up. I'm not liking this. My dearest partner feels that I'll want to watch re-ruins of Kojak on it (which he has kindly prepared for me in advance.) Er no. Weird time warp.

* An account at my local Blockbuster where I regularly owe tens of dollars in late fees.

* A mysterious method of downloading the latest BBC content, which incidentally I would willingly and gladly pay for if the BBC would let me have the iPlayer.

* An online Netflix account that my children use to watch no doubt unsuitable things on their laptops. Note to self. Change the password.

* An online Amazon Unbox account that I almost never use, because the choices are terrible and again, the user experiences worse than bad.

So. This needs cleaning up. The digital home is a dream yet to come in my house. And we're uber nerds. We buy all the latest stuff. It's just that none of it works ideally.

Wednesday, January 6, 2010

Evony Video Game Ads

I've had cause to review Evony ads recently. Users I'm working with now find them offensive. I can see why. They range from Victoria Secret style underwear to borderline violent with obvious phallic symbols. Still. It's a free world. I just choose not to use the service.

What's interesting to me is how their ads have evolved.

Here's a terrific blog post about the subject of Evony ads: http://contexts.org/socimages/2009/07/14/evolution-of-evony-video-game-ads/.

Naturally I was curious. I visited Evony. There's simply nothing you can learn about the service without signing up! Crafty!

Wednesday, October 28, 2009

Looking at subscriber and free churn rates

I was recently asked to look into churn rates for subscription models. I found it tricky to find real industry numbers, but here are the fruits of my digging.

First of all, how we define churn:

Total Subscribers = (Total Subscribers * Loss Rate) + Acquisitions

To get a churn rate, you need to compare your total subscribers from one period with the amount of change within the base.

Of course, you have to be able to know when a customer leaves. For the purposes of this post, I'm talking about specific subscribers to a paid service. Churn on a free service is, I believe, harder, because you have to decide on some activity rate beyond which you feel that user is gone. Could a week, month, two months, three months...

Second, some things that affect churn:

Your rate of acquiring customers is obviously affected by how viral your service is, and your marketing and promotional efforts. Your subscriber cancellations will always be a percentage of your total user base, and that percentage will be affected by things like the quality of your service, how easy it is to cancel, the competitive situation and so forth.

Getting beyond point of no return

At some point, your customer growth flattens because you can't add subscribers fast enough to counteract the number of customers leaving. That's when a focus on customer acquisition and churn reduction is critical, and/or you have to spend more to keep growing at the same historical rate.

Some churn rates I found are below. Naturally some are audited and some are not; some are free and some are not! So take it for what it's worth!


CompanyChurn RateSource / Reference
Sprint / Nextel$2.18% - 2.05%wikiinvest
AT&T1.17% - 1.69%ZDNet
MySpace30%Nielsen, April 2009
Facebook30%Nielsen, April 2009
Twitter60%Nielsen, April 2009
Mobile video services22%Nielsen, Sept 2009
SiriusXM (in car service)60%TheFool
Netflix4.2%Mainstreet Blog, reporting TheStreet.com

Tuesday, October 27, 2009

Is the elevator pitch outmoded?

Michael Port seems to think so. He believes it's all about the conversation. Showing your passion with a back and a forth. But I have heard so, so many people totally fail at answering the question "so what does your company do?" in a way that's brief and coherent, I still think it's critically important to have that simple, reliable statement.

If you, or anyone in your company, can't communicate your value proposition instantly, quickly, and correctly, you're in trouble.

OTOH, Michael's list of what you should be able to answer is good:
  1. Who you serve (your target market)
  2. What they need and desire (problems they have and things they want)
  3. What solutions you offer (products and services)
  4. The big, bad result they get from your products and services (the money shot)
  5. The deep-rooted core benefits they get from that result (financial, emotional, physical or spiritual ROI)
Thanks, Michael. That list I like. But I'm still going to try to stick with an elevator statement at the beginning. It's a good forcing discipline.

I want to get me one of these

I can't wait for the Apple's tablet. Sorry, Amazon. I have a Kindle. I just don't like it. For a start, I keep poking the screen trying to navigate. I hate the flash as it moves through pages. I hate the keyboard. (Anyone remember the 80s Peanut chicklets? It's worse.) I hate the searching. Sorry, but I just don't like any of it.

Now, this. This looks tasty:


Could Apple save the magazine and newspaper industry too? Is there no end to its awesomeness?

And Apple is clearly feeding the frenzy of speculation with leaks about how Apple users would pay almost anything for the tablet. Errmm. That might include me too.

Monday, October 26, 2009

Plenty of room for non-games in top iPhone spots

Looking today at the top 100 grossing apps for the iPhone. You can see them yourself here. (Will launch iTunes.)

Of the top 100, 68 are games. 32 are various productivity or travel helping apps, including smattering of adult stuff and one recipe app. (Well done, Jamie!). Plenty of room for interesting things that aren't games in the top 100! I wonder how the line up will change this time next year.

Here's the list:
  • #2 MobileNavigator North American $89.99
  • #3 RedLaser tag reader $1.99
  • #18 DocumentsToGo for taking docs $9.99
  • #25 Truth or Dare Dating $1.99
  • #26 MotionX GPS Drive $2.99
  • #27 Textfree Unlimited, send SMS messages $5.99
  • #29 Jamie Oliver 20 minute meals $7.99
  • #30 TomTom US and Canada $99.99
  • #31 LogMein Ignition remote control of Macs and PCs $29.99
  • #32 ColorSplash photo editor $1.99
  • #33 Awesome Note and ToDo $3.99
  • #36 iFitness $1.99
  • #44 Police Radio $0.99
  • #45 Zagat To Go $9.99
  • #46 Japanese English Dictionary $19.99
  • #48 Tweetie Twitter Client $2.99
  • #50 Air Mouse Pro for turning iPod/Touch into remote for Mac
  • #52 Flight Track $4.99
  • #53 CNN Mobile $1.99
  • #57 The Weather Channel $3.99
  • #60 Quickoffice Mobile Office $9.99
  • #64 Midomi Music Identifer $4.99
  • #72 Scanner911 $0.99
  • #72 WunderRadio $6.99
  • #73 CoPilot Live North America $34.99
  • #75 Naughtie Hotties Video $0.99
  • #75 Documentstogo $14.99
  • #88 ReelDirector video editing $7.99
  • #92 TVUPlayer TV player $4.99
  • #97 Pocket Informant organizer $12.99
  • #99 FlightTrack Pro $9.99
  • #100 BeatMaker - $19.99
Of course this list is for top grossing apps -- so those expensive GPS apps skew their numbers. If we look at the list for top paid apps, there is a larger proportion of low-priced games.

Update Oct 27: Google's app store. Opportunity to catch the wave early? I don't underestimate Google. And with their mutual board members leaving each other's boards, they are clearly getting closer to a head to head each day. I just want to make sure that I'm on the winning side! And sorry, that won't be Palm.

Thursday, October 1, 2009

How much is too much to pay for a customer?

Been working with a client recently on the gnarly problems around how much to pay to acquire a customer. Thought it would be useful to share this nifty calculation with represents one way to look at the issue.

Traditionally, companies look at a marketing/sales expenditure to be 15-20% of each revenue dollar. But you may have different models. And, frankly, with almost all the companies I work with, there's only a very slim marketing budget available. So let's look at it from the perspective of the lifetime value of a customer:

Lifetime Value equation:

LTV = (Frequency of Purchase) X (Duration of Loyalty) X (Gross Profit)

- How frequently does your customer buy? (say, 12 times a year with a monthly renewal plan)
- How long does your customer stay with you? (let's say 1 year for argument's sake)
- What is your profit? (let's say $5 a month)

Take the average for each of these three questions and plug that into the LTV equation and you have your Lifetime Gross Profit contribution of a customer.

From there you can answer the question “How much can you afford to acquire a new customer?”

A traditional rule states 1/3 of the LTV can be spent to acquire a new customer. Using the numbers above, here's how the equation plays out:

(12 x 1) x ($5) : one third equals $20 to acquire each new customer.

This assumes you have a retention rate within normal ranges—most companies experience 20-25% attrition of customers each year. If it’s more, then there's a different problem — no brand loyalty.

I'd be curious to know your feedback and experience in similar equation models.

Tuesday, September 15, 2009

A great corporate story: Zappos

Zappos is a marketer's dream. They have a story. And the story is fun to tell! I have learned a huge amount from watching them tell their story. And their story is not just about being an online shoe retailer. (I know. I know. For people with a shoe fetish, that's enough. But for everyone else, this story is so much fun to tell.)

Here's a link to a video of their CEO Tony Hsieh revealing what took his company to $1B in sales from scratch. Before Zappos, Tony Hsieh sold his first company LinkExchange, because it started being, frankly, no fun to work there. Even though it was successful and profitable, with about a million different Web sites using their network, and 100 employees, he still decided to sell the company to Microsoft. He says he'd just stopped thinking about company culture. He had hired people with the right skill sets, but with the wrong company culture. After LinkExchange, he started a company called Venture Frogs that invested in other companies. One of those companies was Zappos.

If you listen to the presentation, listen to how often he says "we" and "our." Not "me" and "mine." I think this guy is the real thing!

If you don't listen to the presentation (and I encourage you to do so) here are my notes.

Company Culture

At Zappos, everything starts with the company culture. Tony wanted Zappos to be a fun place to work. His #1 concern was with building great customer service, and a great customer experience.

Customer service is how they think of themselves. Not just as an online shoe company. But a great customer service company. They believe that 10 years from now, no one will remember they started with shoes. (Interesting to note, this is how Nordstroms started too. They pride themselves on customer service too.) Incidentally, Zappos is moving beyond shoes into apparel, bags, cookware and other goods. Because they have such great service, he says their customers ask them to start an airline or run the IRS! (Not in their business plan immediately, but won't be ruled out.)

An example of a company they love: Virgin! They love how Virgin clearly aspires to be hip and cool in whatever of the many businesses they're in. In the same way, Zappos aspires to be the best in customer service, whatever business they're in.

Happy Customers = Repeat Customers

Zappos clearly shows that happy customers encourage word of mouth recommendations. Repeat customers spend more money. Zappos does have offline and online advertising budgets. But, when they look at their marketing spend, they believe that if it pays for itself in the first order, then great. Otherwise, most of the money they would have spent in paid advertising they have they put back into customer service instead of in marketing.

What Makes Great Service?
  • free shipping both ways
  • surprise upgrades so customers get their orders sooner
  • they run their warehouses in Kentucky 24/7, even though that's not efficient!
  • 365-day return policy
  • 1 800 number clearly displayed on every Web page
Let's talk about that 800 number.

Tony notes that it's often hard to find an 800# on many Web sites. Zappos, however, wants to talk to their customers. They get about 5,000 calls a day and rather than looking at it as an expense, they look at it as a marketing opportunity. It's a way to brand themselves as "above and beyond" with customer service.

Zappos has about 500 people in the call center. They run their center without using the 'average call time' model so commonly used. Agents do not get "written up" if they spend too long with a customer. And they don't have sales/performance goals. They're just required to go 'above and beyond.' Their agents can spend an hour with a customer and that's OK.

So for example, if they don't have the precise shoes in the right size that the customer wants, they are trained to look on competitor sites and refer the customer over to those competitive sites! Customers remember that. They come back.

What do Customers Experience?

What customers experience is very important. Fast and accurate shipping is the first quality indicator.

Originally, in 1999, Zappos main idea wasn't customer service. It had a drop ship model. Manufacturers would drop ship for them, so Zappos wouldn't have to carry inventory. Looked good on paper. But the problem was that the manufacturers were not accurate, and weren't fast. And that reflected poorly on Zappos. After that, they had a hybrid drop ship/inventory model for a time, and drop-ship accounted for 25% of the business.

They realized they had to be brave and give up the drop ship revenue. This was hard. They weren't profitable. But they were brave. They took control. They became true to their brand. It was both the hardest and easiest decision to make.

Since then, decisions became easier. Everything is decided through the prism of customer service and company culture.

Zappos is now on track for over $1B in annual sales.

Train the Staff

It's important that everyone in the company understands the company culture. Every single person that's hired -- lawyer, accountant, warehouse person -- goes through five weeks of customer loyalty training. They have to be on the phone for two weeks with customers. They have to go to the warehouse to see what goes on there.

Only after those five weeks do the employees start their real job for which they were hired! Employees must make that five week commitment, or they are let go.

When they are hired, there are two sets of interviews: the standard set with the hiring manager and team going over their skill sets. The second interview with the HR department to see if they are a cultural fit. Performance reviews are judged according to 50% fit with company culture, ane 50% on job performance. People are rewarded for inspiring culture with others.

A Customer Story

Tony tells a story about a woman who bought shoes for her husband. They fit. They were fine. But the husband was killed shortly after the purchase in a car accident. The woman called about the return policy and got her money back. The agent then took it upon herself to send flowers to the funeral. Everyone at the funeral heard about it. A great word of mouth story. There was no standard operating procedure for this circumstance. She just knew it was the right thing to do. She didn't even need to check with her supervisor. She just went ahead and did it.

(A sidenote: would I be worrying about returning a pair of shoes the day after my husband got run over? I think not. But that's beside the point.)

Another Customer Story

A woman ordered a wallet at Zappos. She didn't like it and returned it. But she'd accidentally left $150 in cash inside the wallet. The minimum wage warehouse worker returned the money to her. Again, another opportunity for the woman to tell others her story.

The Vision Thing

Building a company vision is critical. Here's Tony's advice about vision:
  • Whatever you're thinking, think bigger
  • Does your vision have meaning?
  • Chase the vision, not the money
Think of a vision that you'd be excited about, even if it made no money at all!

When you're small, you can experiment and find out what it takes to get customers to come back again and again. You can really focus on getting conversions right, getting service right, getting the product right. Once you have that right, the rest of the stuff comes easier.

People and Core Values

Find people you trust with decision making. Force yourself to invest in teaching your people to do the things you may do better initially. It takes longer, but works in the long term.

But even with all the right people, those people must buy into the culture. Zappos has a "culture book" they put out. Every single employee writes something about what Zappos means to them. It's unedited, except typos are fixed. Anyone can get a copy of that book. It's clearly part of marketing the Zappos story.

What are Zappos' core values?
  1. Deliver WOW through service
  2. Embrace and drive change
  3. Create fun and a little weirdness
  4. Be adventurous, creative and open minded
  5. Build open and honest relationships with communication
  6. Build a positive team and family spirit
  7. Do more with less
  8. Be passionate and determined
  9. Be humble
Having a list like this is really important when you're small, because it saves you heartache and headache later.

Tour Zappos: Learn What You Need!

You can get your own free tour of the Zappos offices in Las Vegas. Just write to tony@zappos.com. Recently, they hosted Southwest Airlines and Legos. In particlar, both companies wanted to get the in-depth tour of their phone center. Southwest also wanted to hear about their HR hiring practices. Zappos is happy to share what they've learned with others. They are open about their experiences.

I hope these notes helped you. Zappos has courage and chutzpah. I love telling their story.

(And yes, I've spent multiple hundreds of dollars on their site too!)

(And another thing? I'd beg for an interview to work at Zappos in a nanosecond. If they weren't based in Las Vegas. I'm not a Las Vegas person I'm afraid.)

Friday, August 21, 2009

Who's making money on Facebook? And how?

In the early days of the Facebook application platform release, I was seriously underwhelmed by the applications on display. They were, and in many cases continue to be, dumb, spammy and boring. No, I really don't particularly care if your pigs are running, well hog wild in Farmville. But it's OK that you do.

In many cases, none of these apps were making a cent. They may have been popular, but where was the money to support them? Just as regular Web sites have had to start diversifying beyond purely ad-based models, apps couldn't just rely on ads on canvas pages to sustain their development.

With the explosion of virtual goods, application developers are finding new ways to help themselves to a little of your money at a time.

Virtual goods have a long way to go in the United States. They are a mature market in Asia. According to Virtual Goods News, Asia's total annual virtual goods economy might be worth more than $4 billion, which is about 25 times larger than the market in the United States, currently purportedly valued at $200 million.

Facebook Virtual Goods Games

Take the games from the Chinese developer Reeko for example. (Tagline: "play with friends.") According to an interview with their CEO Patrick Liu, monetization on Facebook has been higher than on other Reeko platforms. Their game Sunshine Ranch has 1,162,511 active monthly users as of today. You can play Sunshine Ranch for free, or buy coins for a range of $5 to $50 or more using Visa, Paypal, MasterCard or Amex. Coins let you buy carrots, pumpkins, fertilizers and more.

A similar game, Farmville, is at the #2 spot on the hot games list at Inside Facebook. You buy coins to let you plow more fields and, well, do other farmy things.

In fact, the majority of the games on this list are monetized through a free to play virtual goods model. You can play for free, but if you want to really pimp up the game, you need to buy stuff. If you don't want to buy using real money, you can participate in advertiser-financed offers through companies like Super Rewards and Trial Pay.

Facebook Celebrity Virtual Goods

Lots of news about the Britney Spears gifts now available on her page. She has 2 million fans, and presumably she believes that at least some of them will spend $1 to $2 to send a little itty bitty pic of her to their friends.

Other celebrities, Harry Potter for example, allow you to share branded gifts for free. Hoping of course that it spreads the word about Harry's latest movie offering.

Getting Real: Real Life Facebook Gifts

Also new, developers can now integrate real gifts into the Facebook Gift Shop, alongside virtual gifts. So you could actually physically arrange to have red roses sent to the one you admire, instead of just an icon. When users select a physical gift, they'll be asked to enter a delivery address just like a traditional online shopping experience. You can already see Britney Spears gifts on offer, and other branded gifts. I don't know how much of a slice Facebook gets from these gifts, but it's all good for them.

The Pay with Facebook Option

Facebook itself wants to get into the stream of money moving around, with their new "Pay with Facebook" option. It remains to be seen whether this new feature will become a ubiquitious method of payment. But regardless of that, virtual goods apparently represent a minority but decent chunk of Facebook's revenue. Social Media Today provides these (unsubstantiated) estimates:
  • $125 million from brand ads
  • $150 million from the ad deal with Microsoft
  • $75 million from virtual goods
  • $200 million from self-service ads
Total: $550 million

To read more about Facebook Virtual Goods, go to that section of the mighty fine Inside Facebook site.

Friday, July 17, 2009

What makes a great marketing campaign?

Is it a formula? Luck? Rohit Bhargava's "Influential Marketing Blog" describes the winner of the International Cannes Film Festival's award for a great marketing campaign: a marketing campaign called "The Best Job in the World" for a little-known island off the Great Barrier Reef. It's a good story, and worth reading.

He whittles the successful components to a great marketing campaign down to the following key items:
  1. Make it believable
  2. It's not about how much you spend
  3. Focus on content, not traffic
  4. Create an inherent reason for people to share
  5. Don't underestimate the power of content creators
  6. Give your promotion a shelf life
Read his blog post. It's worthwhile, and the list is one that I'll think about when I put together my next campaign.

The CPM Gap -- what does this mean?

Everything that Seth Godin writes gives me pause. Make sure he's a staple of your media diet. Just read "The CPM Gap." He believes advertisers consider their targets as victims to be interrupted. That doesn't feel good.

Advertising on the Internet is still too much like ads in a glossy magazine. Not relevant to the context. Something you have to flip beyond to reach the rest of the story. Occasionally attractive to look at, but not the reason you came to the magazine. (Unless, of course, it's Vogue magazine -- which is basically a magazine of ads.)

Tomorrow's advertising will be entertaining, educational, relevant, honest and content-rich. It will be integrated into a site's user experience in a way that doesn't distract the user and doesn't make them beg for a close box. How much do I hate the ads that float across my screen? A very great deal. I hate them so much that to click on them would be an anathema. And to consider buying the product they promote? Never. Ever. Ever.

Friday, July 10, 2009

It's time for a fresh new look, GM

Driving back from the Revenue Boot Camp this afternoon, I listened to an interview on NPR.Org with GM's Vice Chairman, Bill Lutz. He said it was his job to convince 300 million Americans that GM wasn't all about building gas guzzling cars with lame, tacky interiors. And he's been in sales and marketing in the auto industry since 1963!

I seriously don't wish to disrespect Bill Lutz. But let's get real. Surely you knew that your audience perceived you as a maker of gas guzzling cars with lame, tacky interiors a year or so ago? Well, actually a decade or so ago? Didn't you even talk to your users outside Grand Rapids or Flint? And you're NOW going to be the man to fix it?

Bill Lutz also said that they were going to 'experiment' with selling cars on eBay. eBay?!?! Errrmmm. Welcome to web 1.0, General Motors.

Someone needs to turn GM upside down and shake all the crumbly old men out of the corners. It's a new world. The creators of the old world ain't going to fix GM's image.