Daphne Kwon, CEO and Bill Hildebolt, President were invited to participate in a Q&A on “How to Measure Innovation” by the New York Times, Freakonomics Blog. Other participates include Ashish Arora, John Seely Brown, and Mark Turrell.
“As a start-up company trying to pioneer a new industry, measuring innovation poses an especially tough challenge. Success by traditional metrics — revenue and profits — only becomes evident after you’ve become successful. In fact, early innovation often looks like idiocy and idiocy can masquerade as innovation.”
‘The Collision of Media & Commerce’ is intended to provide a dialog on the growing overlap between the worlds of media and commerce. While we offer RSS feeds for updates to our full blog, there is no way to get just a feed for this ‘thread’ of posts and there’s no way to subscribe by email. If you would like to get email notifications of new posts just to this thread, please send an email to bill@expotv.com with the subject line, “Collision”. Thanks!
Given the marketspace that ExpoTV occupies, we’ve been fortunate to get a bit of a birdseye view on the comparison shopping space and spent a lot of time with leaders in the space, including Smarter.com, Wize, Pronto, Shopping.com, Yahoo! Shopping, Nextag, PriceGrabber and others. They are all great businesses run by great people and no doubt the comparison shopping engine space has been one of the great internet value creation vehicles.
Part of what has enabled that value creation is the straightforward business model: acquire customers for x and ‘resell’ as many of them as possible for y to interested retailers. While obviously the price of acquisition and resale matter a lot, those metrics are largely driven by the market. The critical endogenous success metric of any given engine is the conversion rate. Through rigorous testing, the engines have discovered that the faster you move people off the site, the higher the conversion rate. The only problem with the “maximize conversion rate” approach is that it is extremely hard to build recall let alone loyalty with people who spend less than 10 seconds on your site. (Here’s our “collision of commerce and media” moment…imagine a media property focused on getting you off their site. Doesn’t even compute…) Eventually, though, someone says, “hey, our conversion is great but isn’t our cost of acquisition a lot higher than it would be if we had some loyal users?”
I wasn’t there at the merger table, but I’m sure this was an issue that the guys at ePinions and Dealtime thought they were about to solve when they came together to create Shopping.com. Unfortunately, it didn’t work out that way and we’ve heard second-hand tales about general managers who left Shopping.com completely frustrated with their inability to find the magic formula to build loyalty without crushing conversion & it may not be much of an exaggeration to say that every shopping engine since then has gone through the same painful exercise. Perhaps it’s no coincidence that the one who appears to care the least about loyalty is the one who sold for the biggest price (Nextag).
But is the idea of having loyal visitors (read: returning visitors who cost nothing to acquire) and a high conversion rate a fool’s errand or just a complex issue that’s yet to be solved? There’s some evidence that it’s possible and even that dogmatically clinging to the success formulas of the past may be preventing the industry from moving forward. When we point to a DMNews article where Smarter.com associated the launching of our videos with a 20% increase in site loyalty, people with experience in the industry will laugh in derision at the idea of a 20% increase in loyalty. It’s as if a unicorn just walked in the room; it’s so outlandish that our eyes must deceive.
Still, there’s no lack of innovation and effort to crack the code. Wize has their Wize ranking & Pronto has “Likes”. We were fortunate enough to sit down a couple months ago with Stephen Musikant and Daniel Keller of the successful European price comparison site, Ciao. They have famously loyal and active users. I asked them how they managed the tension between conversion and loyalty. To paraphrase their answer they essentially said, “We don’t. We focus first on loyalty.” Now that’s novel.
Our own Daphne Kwon ran a panel at SXSW this week and the topic was Word of Mouth and Video Advertising. She did a good job (if I say so myself) drawing the crowd into the conversation. A friend noted afterward that the audience’s participation had the consequence of exposing that everyone has their own “rat hole” issue about what is a horrific violation of the rules of engagement on Word of Mouth. And that to me is the point of the presentation. So when some media source jumps all over a marketer, or blogger, for violating word of mouth ethics, let’s all remember that these rules are being developed every day, and nothing is black and white.
Why is there so much uncertainty? Because only now is the web actually impacting word of mouth. Word of mouth for decades before the internet had been limited to only people you actually knew. That’s why online text reviews were actually separated by Nielsen from “recommendations from other consumers” in a survey on sources of product information. Online text reviews are structurally anonymous, and with that there is little incentive to disclose a reviewer’s potential bias or any outside motive (a notable exception would be epinions, which tried hard to get you to know their reviewers). Therefore, online text reviewers were quite distinct from any traditional conception of the more personal “word of mouth”. See slides from the powerpoint presentation here. But the new “socially networked Facebook world” now lets you make those personal connections, and word of mouth has exploded online.
In an attempt to help define attributes that should guide whether or not something can be an authentic word of mouth piece, the audience helped develop four key questions to ask yourself as a content contributor, from bloggers to community members:
1) What is the level of personal familiarity your audience has with you? This is what makes anonymous text reviews so ineffective. A personal knowledge of who you are will go a long way in building trust of your point of view on the world.
2) are there incentives structurally that might bias you? Even disclosure doesn’t overcome certain structures like being paid by marketers to say something. Is your content affected by something other than your true opinion?
3) Is the publishing platform one where other opinions could be heard? Is it built to be open and honest? Or is it built to publish only one opinion (yours) and no other voices?
4) Was everything disclosed? Any relationships, and bias, any incentives?
This last point seems more like a desperate request than an actual attribute of word of mouth. (For example, just because you disclosed being paid and scripted by marketers obviously doesn’t turn it into word of mouth.) I think by listing “disclosure”, users just want to be able to judge individually whether there’s anything that, in their personal judgement, might affect the authenticity of your opinion. Not everyone agreed where that boundary was in the audience on each of those points. One person said that you had to have bought and paid for a product to be an authentic review, another said a review of a gift from mom was perfectly fine. The beauty is, upon full disclosure, we can each judge for ourselves.
Here is another fabulous article in the Collision of Commerce and Media space & it also comes from a digital agency. In this article, Frank Kochenash of Avenue A / Razorfish makes the most forceful argument we’ve seen around compensating community members on social networks. It’s not just a good article, but it’s a brave article because not only does it go against what people have been indoctrinated to believe, but it questions (to a degree) the business models that a lot of “Web 2.0″ sites are pursuing. Hope you enjoy it: http://www.jefflanctot.com/2008/03/11/fair-trade-an-argument-for-rewarding-users-on-social-nets/
This ClickZ post by Digitas’ Christine Beardsell is so good, there’s really nothing to add, except to say that it is a really good sign for 2008 that agencies, and hopefully even their clients, are starting to demand that we look to the next thing. Enjoy! Christine, I’ll definitely keep reading your stuff and hope we get to meet some day!
We’re going to crank this part of the blog back up & while this isn’t exactly happy news for the “space”, it’s definitely news that NBCU backed Firebrand has tossed in the towel after only a few months. The new splash screen (obituary?) on the site (don’t know how long this will be live…) kind of says it all, “its never easy when art meets commerce”. Given that someone there understands at least that much, the disappointing part was that they gave up so quickly. I wasn’t impressed with Firebrand and frankly I’m not impressed with Honeyshed so far (probably none of them were impressed by us, either!). But I do respect that what they were trying to do is hard and different and the first steps are unlikely to be all that amazing. So the shame of it all is the timing. This was over so fast that we didn’t learn anything. There was no innovation phase, there was no iteration. Is it really a surprise that just throwing up a bunch of high art commercials didn’t immediately go viral? That it didn’t immediately lead to double digit sales growth for the advertisers? Did anyone really think that reconstructing the value chain between manufacturers and consumers would be that easy? I think it calls into question (again) whether or not big media companies can really play a meaningful role in innovation in the space (I think the exception at the moment is Viacom, where Mika Salmi appears for the moment to be playing the intrapreneurial role extremely well. I hope it lasts.) vs. simply M&A (where I’d give high marks to Quincy Smith). I’m really optimistic about 2008. I love what we’re doing at ExpoTV and I love what a lot of other people are doing in video, in commerce & in the spaces in between. But make no mistake, it isn’t going to be easy to remake a media landscape where some big edifices have been built over a long period of time. Just like there’s no way to go through a maze in a straight line, no one is going to get it right on the first go.
Update: AdRants has written the definitive post on the downfall of Firebrand here. Beyond the merciless de-construction of the premise, the comments are interesting, including one from Shari Leventhal, Firebrand’s former CMO.
No announcement in the last year has driven home the reality of the Collision of Commerce and Media more than Facebook’s announcement yesterday about their new social advertising strategy. It is at once brilliant and obvious. While I’ll be the first to say I think it’s dangerous when 23 year old CEOs (or even 38 year old Presidents…or 33, if you use my “myspace adjusted age”) talk about 100 year trends (see the bottom of this article), in this case I think Mark is right… we’re going to see a massive shift in how people are marketed to and the idea that marketing is going to graft (said here without the pejorative connotations of some definitions…replace with ‘draft’ if you’d prefer) onto the power of word of mouth is inevitable. We’ve said it many times before in this blog…it’s all about transparency and as long as everyone knows what’s happening, consumers will ultimately be ok with it.
Here’s the other thing that was brilliant: Facebook turned privacy inside out. Another part of the genius of being 23 years old is that Mark has probably never heard of the Doubleclick / Abacus privacy debacle that put mental handcuffs on everyone in the digital industry for the last 6 or so years. Privacy issues? What privacy issues….Facebook members are real people who opt into these behaviors. Ohhhhh yeahhhhhh. Sometimes it just takes looking at from a different angle.
On the lighter side of the Facebook world, here’s a great video making its way up the YouTube charts:
So I was at a small gathering yesterday…that I probably had no business being at. It was hosted by a leading business periodical who partnered with an innovative think tank. There were about 15 CMO/CIO execs from Fortune 500 companies there who were hoping to ‘unpack’ social media on the net, and define tangible ways on how their companies could participate. Scattered among these execs were a couple net entrepreneurs, writers and smart industry pundits. Overall, it was a very thought provoking day.
It was ‘off the record’, so I can’t really give you a record of the day (as if you wanted one). But I’ll just tell you what I observed:
– There’s a lot of desire and creativity on the part of the manufacturers/marketers to do…SOMETHING
– Their motivator seemed to be more driven by fear than opportunity
– Loss of control is something they think they can still *decide* if they want to do with their brand
They are denying that they have already lost control. That netizens now have a mouthpiece for themselves that amplifies and accelerates their own individual messages…sometimes faster and more effectively than that $10,000,000 marketing budget.
The execs’ fear of these uncontrollable individual messages getting out seems to paralyze them. They draw a blank on what to do.
The execs I met yesterday are so smart…so passionate about their brands. They’re experts at human nature and how to win people over. Yet, for some reason they think social networks defy human nature – that somehow all the rules they know have just flown out the window.
Human nature has not been eliminated by the net. On the contrary, social networking has finally injected a healthy dose of human nature *into* the net. Your knowledge, expertise as marketers is actually dead-on relevant to properly participating in social networks. Don’t try to STOP people’s messaging. When has that ever worked in life? In marketing? Win them over instead. Invest in reaching out to them. There’s no one in the world who’s passionate about a movement, product, brand, cause, whatever, who wouldn’t want to know they’ve made an impact on a big company. Knowing they’ve been heard by you is a powerful way to create an enthusiast. It’s human nature. And human nature is now alive and well on the net.
I have finally started to get my act together around online music. Ever since Quincy Smith and CBS announced their purchase of Last.fm, I’ve been digging into the site (listening to a station they created for me based on my love of DJ Tiesto right now) and trying to understand the lessons. I’ve also been trying to figure out Pandora and iLike, but finding them a bit more complex (it’s me, not them). And while I’d be the last person to argue that the music business is an easy one, there is one huge advantage relative to some other consumer products businesses….namely, people are wildly, sickly passionate about the product. So passionate that you might have even stumbled over my describing it as a consumer products business. It’s not a product…it’s a lifestyle, it’s who I am, it helps define me.
That passion means that consumers will put up with - won’t even SEE - a lot of marketing that would be inexcusable in other industries. As hinted at in my Honeyshed post, MTV (regardless of what the labels may have thought at the time) was an enormous commercial for the music industry. From working in the cable industry, I can tell you that the cable operators saw right through it and thought it was the stupidest idea they had ever heard. I can also tell you that as a 12-year old in 1981, it never, ever, ever occurred to me that I was watching infomercials. It was simply the most fabulous content I had ever been exposed to.
And while he even admits that it took him a few minutes, Om Malik figured it out today while reading about Apple and Bebo working together….commerce is infiltrating social networks. We barely even recognize it as such because music is the form it most commonly takes and it’s so invisible as commerce not only because it is media itself but since we WANT the content (for another use case see here for a book review that I wrote on Amazon’s Facebook app promoting a book that talks about using social media for marketing - commerce - purposes. Twisted, isn’t it?).
It may seem that the lessons here for other industries are few and far between, but I don’t think so. Reread that phrase I used about music….it’s a lifestyle, it’s who I am, it helps define me. What brand doesn’t aspire to this? And in a world of consumer generated media, what brand isn’t representable by ‘media’? The key is to package and deliver this content back to consumers in a way that they perceive as programming, as value, as identity enhancing. The answers, as they say, are out there.
