Statues of Steve Jobs

One of my management professors in business school once told my class that someday we'll see statues of Steve Jobs all over the United States.  

It was his view that Jobs literally saved the U.S. and its economy by recognizing the commercial potential of PARC's mouse-driven graphical user interface (GUI) back in the early eighties.  The invention of GUI led to the personal computer and put the U.S. in a position of power in the software and computing industry.  At a time when it seemed America was rapidly losing in every major industry (automobiles, electronics, manufacturing, etc.), winning in software and computing may be the reason the U.S. continues to be a global economic powerhouse (by most measures the list of the top software and technology companies is still dominated by American companies).

Regardless of whether he deserves the statues might be debatable, but his outrageous success as a businessman is not. The Economist had an article covering his resignation as CEO of Apple this week.  In it, they included a timeline of his career.  I pulled out a few examples and added some of my own to illustrate what an absolute business legend Jobs has been.  Amazing.

1976 - Co-founds Apple, launches first personal computer

1980 - Apple goes public

1984 - Launches Macintosh

1985 - Ousted as CEO after boardroom coup

1985 - Founds Pixar

1997 - Renamed Apple CEO

1998 - Launches iMac

1999 - Launches iBook

2001 - Opens first Apple Store

2001 - Launches iPod

2003 - Launches iTunes

2006 - Pixar sold to Disney for $7.4 billion

2007 - Launches iPhone

2010 - Launches iPad

2011 - Apple surpasses Exxon Mobil as most valuable company in the world

For more on Jobs, check out Jim Keenan's recent post that includes some of his favorite quotes on business. Some great stuff in there.

Disruption, Illustrated

I came across a two very neat examples of disruption over the past few weeks. The first is from Digital Music News and graphically depicts music distribution by medium since 1981, it's fascinating to watch cassettes and CDs grow exponentially and then disappear just as quickly.  Depending on your browser you may need to slide your mouse over the image to turn it on.

The second is from Chris Dixon's blog and illustrates recent disruption in the video game market.  Below are images of the instructions to play Angry Birds versus the most recent version of John Madden Football, arguably the most successful video game for the last ten years.

Over time the incumbent often builds complexity into its product to satisfy customers, to give them more.  But at the same time that complexity can leave new customers behind.  This creates the opportunity for a new entrant like Angry Birds to swoop in and provide a far more easy to use product for the majority of consumers.  At last check Angry Birds had sold more than 200 million downloads.

Angry Birds

Madden NFL 12

Leading Metrics

A couple weeks ago Techcrunch had a post titled, Don't Be Fooled By Vanity Metrics. In it, Eric Schonfeld calls out the difference between what he calls "vanity metrics" and "actionable metrics".

Vanity metrics are things like registered users, downloads and raw page views. These metrics, he says, are easily manipulated and don't necessarily tie to the metrics that really matter. Actionable metrics are the ones that matter. These are things like active users, engagement, revenue, profits, etc. He argues that startups should publish the actionable metrics from the start, instead of trying to fool the press and others with impressive, less meaningful numbers.

I'm always very, very careful about trusting any metrics that come from a startup and are published on a technology blog, vanity or otherwise. Entrepreneurs are very good at stretching or morphing the truth to tell the right story (they're probably not being written about in Techcrunch if they're not good at this). And in an interview with a tech blogger there's little fear of consequences from not telling the truth and big upside from stretching it. That said, if the metrics are accurate and honest, I think both vanity and actionable metrics are critical for any startup to track and manage to.

Instead of vanity and actionable, I've always referred to these metrics as leading and lagging. Leading metrics are indicators that have a strong correlation to more important lagging metrics. The simplest example of this is to apply leading and lagging metrics to a salesperson. For a telemarketer, number of dials is a leading metric for the lagging metric sales. If it takes 50 dials to get a sale, you can track the number of dials a salesperson is making to have a good sense of what sales will look like in a given period. If your salespeople aren't making enough dials or some of them aren't converting at 50:1, then you can make changes quickly. In web startups, leading metrics can be things like: registered users, unique users, emails sent, email response rates. Lagging metrics are closer to $$$ -- things like transactions, revenue driving clicks, number of revenue driving users, and ultimately, revenue.

Determining the right leading metrics to track is critical for any company. It helps management get a sense of how individuals, groups and the company as a whole is performing in real time, allowing for far more intelligent strategic decision making and tactical management.

Blog Comments

I've started commenting on blogs a lot more often and I'm finding it to be really fun.   Many times the comments section of a blog post is more interesting and insightful than the blog post itself.   And interacting with the blogger and other readers allows you to engage much more into the topic.

There's a web service called Disqus that runs the comments section of many popular blogs.   Initially the idea of a web service for blog comments seemed silly to me but it's actually pretty cool (except that it doesn't work well on an iPad or mobile device).  You can setup a Disqus account or simply log-in with Twitter or Facebook.    Once your account is setup, you can build a profile and an 'about me' page and the service will track all of the comments you make across blogs that use Disqus.   You can even "follow" commenters that interest you and be alerted whenever they comment.   You can see my profile here.

Disqus is brilliant in that has formalized the interactions we have on blogs. It allows us to learn about the people we interact with and easily stay in touch with them over time.  In many ways, it's really another social network...not that I needed to join another.

I could see Disqus being very useful for recruiting employees, consultants and partners.  A blog community that focuses on your industry is a great place to find people that can help your organization.   And Disqus allows you to interact with them, watch them communicate, understand how they think, learn more about them and get in touch.  

Personalization Doesn't Work...Yet

Most of us know that a huge trend in e-commerce is the personalization of websites and email content.  You'll log-in into a site and you'll only see the things that you want.  You'll receive emails that are personalized to your interests, you'll only see the things that matter to you.

While this sounds wonderful, it simply doesn't work well right now.  By "well" I mean it isn't profitable.

Here's a perfect example.  iTunes knows literally EVERYTHING about my taste in music.  They know my favorite songs and artists and my least favorite songs and artists.  They know the artists and albums and videos I've purchased.  And those that I've viewed, but chosen not to buy.  They know enough to have give me the most personalized music shopping experience on earth.  

But what do I see when I log-in to iTunes?  Huge display ads for albums from Lady Gaga, Katy Perry and Pitbull -- three artists I've never dreamed of buying.

Same thing with Amazon.  They know everything about my online shopping habits but all I can see on the homepage is a huge display ad for the new Kindle.

The reason for this is simply that personalization doesn't work in the short term.  And marketing managers that decide what goes on the homepage need to hit their numbers this week and this month and this quarter.

I can almost imagine the conversation at Apple:

CEO: Hey, we know so much about our users, why don't we show them albums that are relevant to them on the homepage?  Won't they convert better?

iTunes Marketing Manager: Well yes, they'll convert better but the incremental revenue from the better conversion doesn't even come close to the incremental revenue we get in fixed marketing fees for putting Lady Gaga on the homepage.  In addition, Lady Gaga's label pays us a larger revenue share per album.  Also, if we sell 50,000 Lady Gaga albums this week, we get a $1 million bounty from her label.  So while our homepage to purchase conversion may increase with personalization, it simply won't make up for the marketing revenue we're getting by broadcasting her album to all of our users.

CEO: But won't this turn some users off?  Won't they go somewhere else if we don't show them what they want right away?

iTunes Marketing Manager: I suppose that's true, but hey, I have a big goal this month that I need to hit.  I can't worry about that now.

Of course I'm completely making up the facts and numbers in this conversation, but this is the logic that's driving decision making for many web services that can personalize but choose not to.  It simply isn't profitable yet.  And most companies aren't willing to make the short term sacrifice to provide a better shopping experience in the long run.

That said, I do believe at some point the large web services' personalization tools will get smart enough where the increases in conversions from personalizing a site will outweigh their fixed marketing revenue.  But it's pretty clear to me that that reality is pretty far off.

Songkick

I like to say that there are two things that motivate customers: fear and greed. 

Songkick, a web service founded in 2007, addresses a very simple and common fear: not knowing when one of your favorite bands comes to town.

I signed up for the service a few weeks ago and I love it.  It has a very slick and simple UI/UX.  You simply “track” your favorite bands and the site builds your own personal calendar of events.  It then makes recommendations for similar acts that you should track.  You can also import your favorite artists from Pandora, Last.fm and iTunes.  One thing I’d like to see them add soon is a second calendar that’s full of recommendations that you haven’t yet chosen to track.  That would be great for nights when you just want to see some live music but one of your favorites isn’t performing. 

Once you’ve setup your profile and created your own calendar, the system will send you an email when a show from one of your favorite bands gets scheduled in your area (I've already received a few of these emails and it's pretty exciting when you see one in your inbox).

In short, Songkick has executed very well on an awesome idea.  If you like live music, you should definitely take a few minutes to sign up.

Linking Credit Cards to Deal Sites

Fred Wilson had a good post yesterday titled, Syncing Up Your Credit Cards.  In it he makes the case that there’s tremendous value coming from linking our credit cards with innovative web services.  He uses BillGuard and Foursquare as examples. I posted a comment on the post that triggered a pretty interesting discussion.  My comment points out how I believe that linking credit cards back to deal sites creates an enormous market opportunity for better ‘deal making’ and better merchant marketing.

Rather than reiterate the comment, I’ve posted a screenshot of it below.  I’d encourage you to go back to Fred’s post as there’s some very interesting discussion happening in the comments section.

Scaling an Internet Business

I built the chart below to illustrate a few points about internet businesses.

1. The chart shows the virtuous cycle that comes from sites with user generated content.  YouTube's and Facebook's products are their users.  Their users generate videos and photos that make the site more valuable.  More value, more users, more value, more users.
2. This cycle doesn't exist as cleanly for deal sites.  Their product is deals that come from salespeople.  If they want more deals, they need more salespeople.  That's expensive (they have 4,000 of them).  Certainly, more users make their salespeoples' pitch better, but that cycle doesn't happen neatly.
3. Groupon has a a huge advantage when it comes to conversions.  People come to Groupon to shop; their deals (i.e. ads) are their product.   Conversely, people do not come to Youtube and Facebook to shop.  Their ads are a distraction.  Because Facebook and Youtube make money by distracting people from what they want to do on their sites, Groupon arguably has a more sustainable model.
4. Because Facebook's and Youtube's products are their users and Groupon's product is their salespeople, it's interesting to think about how much incremental value their engineers are adding.  Youtube and Facebook are mostly made up of engineers.

When you build a consumer internet business, don't assume that it's going to happen like it happened for YouTube and Facebook.  Think through whether your value will build on itself or if you need to buld it incrementally, the old fashioned way.  It's also crtical to think through where your scale is going to come from: users, salespeople, or engineers.  The answer isn't always clear.

Your Social Network Asset

Currently I have about 80 followers on Twitter, about 500 Facebook friends and about 500 LinkedIn connections.

There's some overlap between networks, but more or less with a few keystrokes I can send a message to 1,000 people that trust me and are attentive and willing to listen to what I have to say.

That is an asset. A social asset. Not only the captive and trusting audience but the ability to communicate to that audience in real-time, whenever I want and as often as I want.

Like any asset, I can make it more or less valuable over time, either by losing or gaining audience, losing or gaining trust, or losing or gaining attention.

I think it's worth thinking about this for a few seconds next time you want to post something you want people to support. Will it make your social network asset more or less valuable?

Email and E-Commerce

Fred Wilson had a post last week called Don’t Forget Your Logged-Out Users where he discussed how social media sites need to pay attention to the value they create for users that aren’t logged-in; i.e. Twitter allows you to see Lebron James’ Tweets without logging-in.

This is something I’ve thought about a lot in the context of e-commerce.  You need to be very careful about what value you provide to a user before you force them to authenticate (i.e. force them to give you their email address). 

Most web services drive the majority of their traffic through email – especially repeat traffic.  As a result, email capture for a new visitor is critical.  It’s hard to get a user to your site, it’s even harder to get them back – in most cases you need their email address to get them back.  An email address allows you to regularly market to that user to bring them back when you have a better or more relevant offer for them.

So when you think about how much value you provide to a user that isn’t logged-in, you need to consider the potential missed opportunity to capture that user’s email address.

I’ve found that when you put up a authentication page before allowing a first-time user to shop, you lose about 20% of visitors; most users came to your site to see what you have and they’re willing to take an extra step to see it.

I’ve also found that when a user comes a site, there’s about a 5% chance they’ll transact on the first visit. 

Think of it this way:

Scenario 1 – Authentication and email capture before user can shop

1,000 New Visitors

800 New Email Addresses

40 Transactions

Scenario 2 – No Authentication before user can shop

1,000 New Visitors

50 New Email Addresses

50 Transactions

Here’s the question to consider when making the decision on how much value to provide to users that aren’t logged-in to your e-commerce site: what’s more valuable to you, 10 transactions or 750 new emails?

Twitter Business Model

The other day Sarah Silverman tweeted a somewhat vulgar complaint about American Airlines.  I'd post it here but it looks like she deleted it from her Twitter account. Her complaint regarded a connecting flight that was cancelled after a 7 hour layover.

Following her tweet, a short discussion ensued between Sarah and her followers about the poor service they've experienced from American Airlines.

As of today, Sarah has 1,692,580 followers.  To give you a sense of her reach, that's approximately the same number of people that will see this 17,000 square foot Walgreen's billboard that rises 340 feet above Times Square in a 24 hour period.

Imagine someone posting a complaint about your company on this billboard?  The damage that can come to American Airlines and other consumer businesses from Twitter is significant.

I know several companies (particularly airlines) are already using Twitter to communicate with frustrated customers.  I believe there’s a huge B2B revenue opportunity here for Twitter.

If I was American Airlines, I'd pay a lot for a Twitter application that would integrate into my CRM or customer service software where I could view all of my @mentions sorted by the number of people that follow the Tweeter.  If American Airlines is able to turn Sarah into a happy customer and can get a positive Tweet from her, they’ll get 17,000 square feet of Times Square advertising for $0.  A pretty good investment to make in one customer.

I have no idea if Twitter is already doing this or if they're considering B2B CRM as a future revenue stream.  But it seems to me that there'd  be a significant revenue opportunity if Twitter was able to effectively integrate their reach, data and users into a company's CRM systems and process.

What Makes a Good Tweet

I've been using Twitter for two years. I check it almost everyday and follow about 150 people. It's a unique social graph for me in that I follow almost no friends or colleagues. I don't use it to interact, I use it to be informed and to learn. By the way, Fred Wilson has been writing some interesting stuff on the different social graphs we use and what he calls "implicit social graphs" -- social graphs that get built for us rather than by us -- definitely worth reading.

Anyway, so much of what I see each day on Twitter is wasteful: boring personal messages, links to sites I'm not going to click on, self promotion, etc. But I keep checking it reguarly because every few days I find a gem -- a piece of information or an insight that makes me laugh out loud, makes me more informed or smarter or causes me to look at things differently. I love when that happens.

I realize different people use Twitter for different reasons so they're free to Tweet whatever they feel like Tweeting.  But over the last two years I've noticed that the best Tweets, the Tweets that are really valuable, seem to have these  four things in common:

1. No web links; all of the information is communicated in less than 140 characters
2. No hashtags (#), they're annoying, unless they're added to make the Tweet funny, which can work sometimes -- see @bronxzoocobra
3. No @s, unless it's a Retweet; generally conversations on Twitter are lame
4. They aren't a simple statement of what someone is doing or where someone is; e.g. "mowing the lawn" or "at the movies"

To do this well you actually have to think pretty hard, you have to initiate, you have to create. That's why these kinds of Tweets are the best, and probably why they're so rare.