This Week – 01.05.14

After a brief stint on Medium, I’m back to my old WordPress Blog.  I didn’t really see the value yet, but I may be back at some point.

I am also making a few plans to change the format of the content of this blog. While I intend to continue posting original content, I’m going to start posting a weekly summary on Sundays of what I read during the week that I found interesting, and I may post a few upcoming events in New York that I’m looking forward to.  If people like this, I’ll start sending it out in a Newsletter.  Mostly, I intend to cover startups, marketing and marketing tech, management and some tech related industry items.  I’ll also have a New York Tech slant as that’s where I mostly operate.  I’d love thoughts and feedback on these moving forward.

On Twitter’s Average Revenue per user – There was a useful post on Quartz that did some quick math to calculate average quarterly revenue average per monthly user, landing on $0.55 in quarterly revenue per monthly active user on Twitter.  I’ve always found this metric to be a bit confusing as it uses quarterly revenue and monthly-active-users, so this helps break the calculation down to a fairly intuitive level. As a comparison, $FB was closer to $1.20.  Link

More On Acquisition Costs vs. Lifetime Value – Saar Gur from Charles River Ventures created a nice presentation on how to think about acquisition costs versus lifetime value. A lot of startups try to tackle growth before revenue, thinking about it as a sequential equation. While that’s tactically correct, it’s strategically a little lazy.  There are always bigger, publicly traded comps that can help you think about LTV, even if you’re pre-revenue. Link

 The U.S. Student Debt Bubble– Peter Thiel submitted his Graph of the Year for 2013,  choosing to highlight the growing student debt burden in this country juxtaposed against the average starting salary for a student fresh out of school.  This is going to come to a head at some point soon and it’s likely to be an ugly resolution.  It’s also a huge opportunity for disruption and innovation. Link

Kevin Rose’s Tiny New Prototype – Kevin Rose, founder of Digg, created a new blogging platform prototype and just put it out into the world to get feedback. Tiny gives a reader a live, obfuscated view of the author while they’re writing.  While Tiny probably needs some more refinement, I think Kevin’s decision to release a prototype to his audience was a really smart way to work on a product, and contrary to the way a lot of first-time entrepreneurs think about the world (fixed pie, hide your ideas).  I’m also a big believer in the space he’s shooting at, making the web more dynamic, richer and more live.   Link

The Rest of the Story: Revisiting 2011 Predictions

Happy New Year, all.  Here’s to another twelve months of limitless possibilities in 2012.

A year ago I wrote a post on predictions for 2011 and listed five meta-trends that I saw transpiring in the world of tech and media.  I thought it would be a good idea to bring them back up and discuss what happened and what didn’t.  It looks like the obvious stuff happened (although I would welcome contrarian viewpoints), but some of the more nuanced predictions fell flat.  Later this week I’ll write some predictions for 2012, but for now here’s some analysis on how this past year panned out:

Prediction 1: Exponential growth in the U.S. smartphone market.

This was the low hanging fruit of predictions and to a large extent it’s safe to say that this happened.  According to eMarketer,  aggregate U.S. smartphone penetration jumped from 26% in 2010 to 38% in 2011.  That’s the biggest jump we’ll see as adoption slows YOY through 2015.  Of particular interest is the increased adoption in the 35-44 and 45-64 cohorts of the population.  A big question we should ask is how this group intends to use smartphones in the coming years, and what types of mobile services can we offer them?

Prediction 2: An increase in mobile gaming, but a decrease in pay-for-app models.

This prediction largely played out as well (don’t worry, I’m wrong about everything else).  I think this graph from Flurry is the best visualization of the sea change that’s happening in gaming:

Freemium Games

This graph came from a great piece written by Flurry’s GM of games, Jeferson Valadares,  who identifies why this strategy is useful to game developers.

Flurry data shows that the number of people who spend money in a free game ranges from 0.5% to 6% depending on the quality of the game and its core mechanics. Although this means that more than 90% of players will not spend a single penny, it also means that players who love your game spend much more than the $0.99 you were considering charging for the app.  And since you gave away the game for free, your “heavy spender” group can be sizable.

This ‘sizable’ group can drive the business value for your game, and the free-to-try model drastically lowers acquisition costs, keeping your funnel lean and activity high.  I expect this trend to continue for non hit-based games (think casual gamers) in 2012.

Prediction 3: Continued adoption of cloud-based productivity apps by businesses

2011 saw a number of companies make this bet in various industries, and I am confident that cloud-based applications will continue their adoption curve into 2012.  Was 2011 the breakout year for this change?  I think the jury is still out on that and I’ve had trouble finding hard data around this either way.  If anyone has real data on this in terms of customers or revenue I’d love to check it out.  The best piece I’ve found was this NYT article on SAP, but it doesn’t really size the market shift.

One observation that I had this year was that consumers are starting to bring their preferred apps into the workplace.  I didn’t see this as an entry point for enterprise businesses, but it looks like companies like Evernote and Dropbox are going to make their way into the workplace not through the traditional, long sales cycle that enterprise apps make to businesses, but through consumers just adding them on to their computers and demanding that they be permitted to use them.

Chris Dixon correctly points out that the user and the buyer in enterprise are different people, and I think that explains the drag in adoption pretty well.  We’ll see what happens in 2012, but this change is definitely on its way.

Prediction 4: Fragmented social networks

Last January I predicted that people would want more choice in how they share content and who they share it with.  This largely hasn’t happened yet on the web.  Facebook continues to grow at shocking rates considering the law of large numbers – I think they’re predicted to grow over 8% in 2012 according to eMarketer.  In defense of my prediction,  Google seemed to have thought the same thing and made a big bet on Google+ and the ability to develop ‘circles’, which are essentially micro-social networks.  We’ll see how this plays out in 2012.

Another note, when it comes to mobile I think we’re going to see an increase in demand for smaller networks.  Path reached over 1M users this year and released a beautiful iOS app.  Two mobile networks in the K2 Portfolio, Sonar and Tracks,  are both focused on unique mobile networks and are seeing incredible traction.

Prediction 5: Flat adoption of mobile coupons

This was flatter than most predicted, or hoped.  I think the best example of this lack of pickup would be Groupon Now: Groupon’s mobile solution. According to Yipit, when Now launched in May of 2011, Groupon predicted that mobile deals would represent 50% of Groupon’s sales within two years, but it has largely failed to deliver on that promise-  Now has been less than 1% of revenues in North america so far:

Groupon Now

I don’t think there’s a question of whether or not mobile coupons will become a driving force for consumer behavior in the future.  However, timing is everything an 2011 was not the year for widespread adoption.

That’s is for 2011. Overall the big trends that we saw forming up a year ago have largely played out as predicted.  I’ll put some predictions around 2012 later this week.

Creative vs. Data: An Autumn Smackdown

Mad Men

Digital marketing strategy is changing the way consumer brands and enterprises have to think about content.  That’s been true for some time, but there are two main reasons why ‘this time it’s different’:

  1. Like never before, data on the internet is so widely available with every activity, the desire to leverage it is (or should be) natural.  IBM released a study last week after interviewing over 1,700 CMOs globally.  The number one headache identified for their future?  The explosion of data that’s occurring in their worlds (incidentally, social media was number 2).  Over 70% of CMOs reported being underprepared to manage the data.  That’s a staggering percentage…
  2. Media consumption habits have changed so drastically that the volume of content a brand must create in order stay relevant in real-time conversations has gone up exponentially, but the relationship between creative spend and measurable ROI has decreased.  In other words, everyone needs a higher volume of less expensive content than they used to.

My instincts and training, and the above data points, scream that using data is infinitely smarter in the long-run than using hunches to produce content.

The contrarian point, though, has its merits. For one, we’ve been using qualitative insights to sell things for centuries.  So what’s wrong with good content ‘just being good’? After all, doesn’t the insistence of data in everything we do take some of the magic out of the equation?  The most eye-catching  ideas I’ve seen come out of creative agencies were less about data and more about bright shiny objects.

I’ve been teetering lately between the idea of ‘creative’ content development versus data driven decision-making.   I don’t believe these are mutually exclusive, and the best future content creators will leverage data to create content, but there are some differences. Having spent some time on this, here’s what I’ve come to learn over time:

  1. Bright shiny objects close deals.  Everyone wants ideas, a new hotness. Content experts with a high EQ and an intuitive understanding of  emotional pull have a tendency to win when it comes to meetings. There are a lot of biases in the way we present ideas that lend themselves to the ‘PRETTY-PICTURE-BOOH-MATH’ approach to marketing.  The first is that we’re still presenting creative concepts with meetings that we give titles like tissue sessions. Imagine walking into a pitch with a tissue covered board and unveiling a spreadsheet, then talking about segmentation.  Snoozer.
  2. Data keeps business relationships alive.  After the party,  when the bright shiny object wears off,  marketers are always struggling to grasp ROI.  As I was writing this, I stumbled across this article on Moneyball for the Consumer Web that talks about how Rent the Runway employed data to determine the 19 variables that are important to their customers, including color, designer name, dress length, time of year, occasion/purpose, age of renter, body type, neckline, model wearing dress, price.  Now, let’s pretend you need to manage a Facebook Page for Rent the Runway, or write a blog,  or create content to get into other bloggers’ hands to help spread the word.  Do you think that having those 19 variables would be helpful in developing your content calendar?  I would imagine that one could write a few articles on each variable and build a post per week that would be relevant and keep the content flowing (and relavant).
So, from a marketing agency perspective, both elements are important, but I would venture to guess that we spend a disproportionate amount of money on bright-shiny objects, and not quite enough on the data side of our businesses.  I expect this to change drastically in the near future.

Going Around the Wall: Foursquare and AMEX

I once had a manager who used to yell to “go through the wall!!” when we hit challenges.  That’s often the right advice, but it’s not always the best way to expend your resources.  When you’re a startup with limited resources,  it’s far more effective to go around some walls.

Over the past few years, companies have been lining up to take shots at the discount space for obvious reasons: it’s a large addressable market and there’s high demand from marketers of all sizes to use social and Internet services to drive in-store traffic.  Discount listing services like Groupon and Living Social have just started delivering on that promise, and other startups are jumping into the fray.

The problem with bringing the real world and the Internet together is that there are often huge walls preventing integration.  For example, Groupon handles its sales to retailers through a massive salesforce of over 3,500.  To implement the transaction, Groupon has to manage the sale online and handle payouts to its partners.   This process is cumbersome and complex.  If a startup isn’t built around being an financial intermediary between retailers and customers, it can be a big, expensive wall to get through if you want to play in the space.

To add complexity to the issue, a lot of big retailers aren’t interested in having Groupon handle their transactions as an intermediary.  They’d prefer to to use their own POS systems to manage their transactions, but no one has figured out an effective way to distribute online coupons.  Everyone that I’ve spoken to in CPG marketing prefers free-standing-inserts (FSIs) because the redemption rates are predictable and there are a fixed amount in the world.  Moving these offers to online delivery systems always present complexities that the customer and the marketer seem to want to avoid.  If you want to offer discounts automatically through a smartphone application,  POS integration is required and a lot of systems (at casual dining restaurants, for example) aren’t set up to scan barcodes.  Headaches and complexities abound.

With those challenges in mind, the folks at Foursquare continue to impress with their ability to move around walls instead of trying to go through them.  Their recent deal with AMEX removes the transaction processing challenge from their equation.  With this deal, there are no barcode/POS integration challenges and no online transactions for Foursquare to manage.  The cashier at the store doesn’t even need to know about the discount and the customer doesn’t have to walk around with coupons in their pocket.  There’s no online coupon to download and print out and the redemption of the discounts is easily tracked.  Customers simply sync their AMEX card with their Foursquare account and start saving.

I think this deal represents truly innovative thinking on the part of AMEX and Foursquare, and should serve as a model to startups on how to go around walls.

Driving Value In Social Media

My friend Tim Freestone reminded me of something recently that is so fundamental and simple, yet often forgotten in the world of community building and social media marketing.  He said “If you can drive value you can write your own checks”. Tim works in direct marketing for B2B clients and has a very clear path to revenue contribution.  It’s measurable.  It’s obvious.  You either generate transactions or you don’t.   In Tim’s world, value is measured by a clear increase in revenue that is greater than the cost of the marketing services he offers.  Tim generates value.

Social media, depending on how you define it, works differently.  Marketers often analyze what they’ve invested in social media and don’t see lift in revenue, or they may see a lift in revenue but it’s impossible to correlate with their social media efforts.  Social media tends to look ineffective when measured directly against revenue growth (this is very similar to the Public Relations industry issue- but that’s a different post.  For this post, I’m talking about social networks and blogger outreach).

Today I want to play with the equation up top.  ROI is calculated by measuring what you made, subtracting what you’ve invested, and then dividing that sum by what you’ve invested (expressed as a percentage).   So, if you spend $1, and you make $2, then your ROI will be [(2-1)/1= 1]  = 1.00 = 100%.

I believe social media generates a lot of value for brands, but I believe it shows up in strange places on a financial statement.  Here are a few examples of why it’s difficult to measure:

Most of social’s revenue contribution is credited to other channels

A lot of consumers who engage with brands in social do not take a revenue-driving action directly from Facebook, or blog, or any other social network.  Some do, but a lot don’t.   Most of them consume some type of content, maybe interact, and then go about their day.  In the digital space, it’s often insightful to look for correlations between increases in direct traffic and search volume against social media efforts (try this and let me know what you find).
Just because a consumer doesn’t click out of a Facebook status update does not mean that they haven’t been impacted.  On the contrary, getting “into the stream” is far more effective than being on the periphery (in a digital ad).  Marketers who think of streams as ads are often missing the point, or not looking closely enough at their digital presence.

Most of the value in social media comes from cost savings and increased customer lifetime value

If you are a consumer brand and someone has an axe to grind, you really need to be in social media.  Consumers are fickle and tend to drag brands into a very public conversation when they feel wronged.  On the other side, people use social platforms to evangelize brands and you’ll probably want to be around for that, too.

Creating a platform for customer engagement decreases customer service costs (as less people lodge complaints through other channels), but more importantly decreases the cost of having to acquire new customers (to replace the ones you lose by not being respondent).  These metrics go into the “what you made” section of the ROI equation, but they don’t directly affect revenue growth, they affect profit by lowering operating costs.  New customer acquisition costs are usually the highest marketing expense a company has.  I can’t understand why more brands don’t measure the customers they keep.

Increasing intangible asset value isn’t necessarily a revenue driver…

By extension of the point above, maintaining brand awareness, increasing customer lifetime value and increasing brand affinity also show up in intangible assets (brand value). This isn’t something that marketers with short and mid-term goals look at, but it’s definitely something CEOs want to look at.  Again, contribution from social media to brand value is difficult to measure, but it’s certainly one of the biggest pieces of value offered.

Social media can increase lifetime customer value, decrease your customer service costs, and make a significant long-term contribution to revenue through the viral nature of word-of-mouth marketing.   But I think marketers need to stop looking at their social media efforts with the same microscope that they measure their SEM campaigns- it just doesn’t make sense.

The Media Generation (M2) Means CPMs will Change

I really enjoyed checking out this writeup on Silicon Alley Insider about the media habits of 8-18 year-old American kids.  The study was released a few months ago by the Kaiser Family Foundation (you can see the full study here).

There are a few choice statistics in this report.  The most interesting piece to me is the amount of media exposure that tweens are exposed to today, and the exponential growth rate that they’ve experienced.  At 10.5 hours in 2009,  kids are essentially spending every waking moment consuming media.  What’s more, this represents an increase of 43% from media consumption levels from just ten years ago.  I’m unsure how kids can find this kind of time in their days.  It would seem to leave little time for anything else.

Studying is wasting XBox time (teen interviewee)

In most interviews taken, kids are talking about texting, listening to iPods, watching TV and playing video games, often at the same time.    Social networking takes up over 2.5 hours per day.  Other top time-consuming activities include playing video games and watching online videos:

I propose that this level of media exposure greatly lowers the value of advertising, in general.  Let’s look a t a 30 second television advertisement.  In a 10.5 hours media consumption day, that’s 1/1,260th of the media “real estate” that a kid is consuming today; is that worth the price of admission?

Additionally, it seems that kids are multitasking more than ever; which lowers the amount of attention an advertiser gets with their spot.  I believe this is why media buying will move further towards measuring interactions instead of impressions.  The value of simple impressions has dropped significantly in the past few years, and probably with good reason (CPMs can be purchased for less than $2 in some networks).  How can advertisers be certain anyone is even exposed to their ads if  they take up such a small piece of the attention pie?  The only answer seems to be inserting an interaction qualifier:  using QR codes, measuring clicks, using tracking URLS and other interaction-based measurements are going to increasingly become the standard.  The downside of this, as Chris Dixon points out, is that buying performance tends to rewards content light sites where users go often, and click through quickly (at least for any cost-per-click or affiliate marketing programs).  This creates new challenges for the media industry as a whole, as advertisers will continue to search for ways to become signal in an increasingly noisy environment.

Quora and the $86 Million Question (and Answer)

TechCrunch recently announced round A financing secured by Quora,  a new site  founded primarily by ex-Facebook employees.    At a rumored $86 Million valuation,  the site has garnered significant attention from the start-up, tech and VC worlds.  I recently received an invitation to join and spent the past few days playing around on it in my spare time.  Here’s a quick breakdown of how it works from my perspective:

Quora is basically a question and answer site.  Users can ask questions, categorize questions into topics, comment on questions or answers and answer questions. Users can also follow things: people (other users), topics, or questions.  Users can also endorse other users on specific topics. Quora notifies users when activities occur on the items that the user is following  (i.e. “Jimmy Smith commented on an answer to Can Brands Sponsor Questions in Quora?”).

Nothing special so far.  And yet,  Quora is an incredibly addicting user experience.   The content that’s been developing in the site is top-quality:  experts and extremely curious users post questions, comments and answers on fascinating topics.  The user  experience is also extremely rewarding.  Asking questions drives activities (interactions) and the community is incredibly fast at interacting with your questions.    So, what’s the point?  Co-founders Adam D’Angelo and  Charlie Cheever had this to say regarding their goals for the site:

The way we think about this is there’s actually a lot of information that’s still in people’s heads that’s not on the internet. And when you think about it you would say that probably 90% of the information that people have is still in their heads, not on the internet.

WHen asked (In Quora) what the long-term business plan for the site was,  Adam answered (first response):

It’s hard to plan ahead too far on the internet because things change so quickly, but there’s a good chance that advertising will end up as some component of our business. There are a lot of other options, too, but our focus as a company is on building Quora as a product, and our costs are low enough now that we can afford to delay worrying about monetization until later

I’m impressed with the environment and I think the site has a lot to offer.  I will be interested to see what the site becomes when it opens up to a larger audience; there will certainly be some pretty heavy diluting of the content (right now the site is populated witha disproportionate amount of computer scientists, entrepreneurs, web developers and designers, etc) and this will be a challenge for the site.  I have a three more invites on to the site.  If anyone is interested, drop a comment with your email address and I’ll send you an invite.

Facebook Leads Sharing, So Content Changes Forever

As someone who works in social media, our biggest driver for success is organic sharing of information and content. The chart below from Silicon Alley Insider shows what many of us already know on an intuitive level. Facebook is the epicenter of all things social:

I’m fascinated that sharing on Facebook is higher than email, although I guess we shouldn’t be surprised. The sharing function on Facebook is so easily integrated into the experience, it’s a natural evolution that it should become a center for sharing, seeing as how everyone, even my grandma, seems to have embraced it. But what are people sharing, really? I think it’s safe to say (in a broad-stroke kind of way) that people are sharing some type of content with one another. Whether it’s a video, an interactive application, a photo or an article- it all comes down to content being shared, and becoming more (or less) valuable as a result of that sharing. Which brings me to another point: as social networks become the drivers for content consumption and sharing, communication will change forever.

In the past, content consumption and advertising communication was a one-to-one communications strategy. Advertisers structured their creative, built out the assets needed for the media channel and disseminated that message to the masses. After the message was distributed, ads had done their job. Marketers would have to wait to see the results of their communications efforts, because people would digest the message, maybe discuss the content at the water cooler, and make a purchasing decision somewhere in the chain. This meant that commercials were designed to speak to the individual. For example, if you wanted to sell beer through television, you needed to create content that would speak to a large number of individuals. Bud Light is talking to me, hoping I didn’t change the channel or go to the bathroom, and measuring their success based on whether or not I buy their beer later on.

With community consumption, the rules are entirely different. Now the messaging is one-to-many, or one-to-community, and we’re all able to consume content together and discuss it in a very public way. The success of your content can now be determined almost immediately, and purchasing decisions will most likely be made not based on the content, but on the public response to the content. This is a totally different scenario– game changing. Think about how you behave as an individual, then think about how you behave in a group. I think Tommy Lee Jones pretty much nails in this scene from Men In Black. This also gave me an excuse to put a movie clip in my blog post:

How can we continue to create the same type of experiences that worked in television, and try to apply them to a socially networked society? The short answer is that we can’t. We need to be creative about the experiences we’re creating, because people are undoubtedly going to talk about it together.

Social Traffic Referrals

by Christian Brucculeri

I was reading Fred Wilson’s awesome blog the other day and I was inspired but what he said at the #140 conference:

“social media, led by Facebook and Twitter, will surpass Google in driving traffic to many websites sometime in the next year.”

I believe this will happen as well.   I believe we’re searching a little less than we used to.  Granted, when we want specific information (on a health topic, or for shopping) nothing can stop steamroller that is Google (no, not even you, BING), but when I’m just cruising along through my day,  I want to listen to my friends.

I do believe that Twitter is fast becoming a central traffic driver, as that’s essentially all I use the technology for anymore.  While I do enjoy the occasional status update from a friend, I’m more interested in the content people want to drive me to .  Even as I write these words it scares the crap out of me.  Why do I want to be part of someone’s organic search optimization attempts?  I’m not your sponsored search keyword, PPC victim-  so why do I want to click on your links?  Simple: I asked you if I could.

Every time I see a new Bit.ly link I want to see what’s behind it.  I want to see it because you’re my friend, or I find you interesting, or your a publisher I trust.    I know we might have just met, but I’m ready to click on you to see where you’ll take me,  because I believe you thought about it before you put that link up.  I honsetly trust that you stopped before hitting “update”  and thought “Shit, am i being annoying right now?  No, this is cool…let’s roll”.  This is light-years beyond an auction for a keyword, or a brand name buried in a BS blog entitled something like “getyoursiteoptimizized.net.au”.  So please, send me links in your tweets-  I’m interested…

The distance between zero and one

by Christian Brucculeri

A friend of mine once told me that this distance between zero and one is infinitely greater than the distance between one and two. I completely agree and, in homage to this statement, I am filling this space with my first blog post.

I’ve been holding off publishing anything due to the fact that I couldn’t think of a title for this blog, grab a vanity URL or even find a decent graphic to post in the header- all simple tasks, none of which I’ve been able to achieve. I can chalk it up to any number of reasons: I’m too busy, I’m too busy and of course, I’m way too busy to start a blog.  At the end of the day that’s starting to feel like a pretty lame excuse.

I am hoping that this post will serve as a swift kick to get me started. Hello empty space!!

“Until one is committed, there is hesitancy, the chance to draw back, always ineffectiveness. Concerning all acts of initiative (and creation), there is one elementary truth the ignorance of which kills countless ideas and splendid plans: that moment one definitely commits oneself, then Providence moves too.

All sorts of things occur to help one that would never otherwise have occurred. A whole stream of events issues from the decision, raising in ones favor all manner of unforeseen incidents and meetings and material assistance, which no man could have dreamed would have come his way.

Whatever you can do, or dream you can, begin it. Boldness has genius, power and magic in it.

Begin it now.”

GOETHE