The "I'm Here" Rationale

In the offline world, once you get a customer into your store there’s generally a good chance that you’re going to get them to buy. 

They took the time to drive to the store, park, get out of the car and walk inside.  There’s a negative feeling of wasted time if they don’t buy something.  So if your store doesn't have the best price or best selection the consumer is still likely to buy: “well, this shirt isn't perfect, but I’m here, I might as well buy it".  I’ve felt this way many times as a consumer.

This feeling doesn’t exist online; if it does, it exists to a far smaller degree.

The cost of leaving an online store is less than a second (just close the browser window).  The "I'm here" rationale doesn't work.

This is an important insight as it disrupts many traditional conversion methods used by marketers.  For example:

1. Loss leaders don’t work online: if you get someone to your site with a great deal and they miss it, they won't buy something else, they'll go somewhere else
2. Impulse buying -- a huge offline revenue driver -- is almost impossible to replicate on the internet; you’re not stuck in a checkout line, the line moves as fast as your internet connection 

Of course there are multiple other examples.  Like so many other things, the internet is disrupting old fashioned conversion tactics and putting the consumer back in the driver's seat.  A good thing, in my view.

Usage Metrics

Most web services closely track their site usage and site conversion.  A "user" that "converts" equals $.

In e-commerce, you could describe it like this: get people into the box (drive usage) and do well for them when they're in the box (drive conversion).  

I thought I'd take a moment to clarify a few of the key terms associated with usage metrics in e-commerce as there's often some confusion around how these metrics are defined.  In a subsequent post I'll talk about some of the key conversion metrics. 

Usage Metrics:

• Registered User: a new user, or a user that came to the site for the first time in a given period and accepted terms of use and (generally) provided the site with their email address
• Total Registered Users: sum of all new users
• Unique Users or Unique Visitors: the number of individual people that came to the site in a given period (only count 1 visit per person)
• Sessions: the number of total site visits during a given period (count all visits for all people)
• User Activity: the % of total registered users that visited the site in a given time period

To keep it simple, when evaluating a web service's usage I really only want to know two things: 1.) how many total registered users do they have and 2.) what % of those users visit them each month?

Generally, I find that usage is pretty healthy if around 25% of registered users are coming back to the site each month, though this can vary widely depending on the vertical.

"User-First" Client Acquisition

I built the simple framework below to help me think through the enterprise product conversation happening yesterday.

A B2B company could find itself in one of four situations.  The goal is to be in the top right quadrant (good sales talent, good product quality) so that you can simply accelerate what you’re doing.   But the most interesting to me – and the one that I think will be the fastest growing – is the top left quadrant: when you have a good enterprise product but little or no sales talent.  I’ve seen more and more startups come along that have super cool products but no enterprise sales experience or talent.

The old fashioned solution to this problem would be to hire, partner or find an experienced distributor that could move product for you.  But largely because of what I think is an increasing hesitancy among early stage companies to over-invest in sales & marketing, there’s a ‘user first’ strategy that seems to be gaining traction.  Companies like Yammer are providing value at no cost to individual users but charging the company for “premium upgrades”: system integration, security, admin rights, etc.

At its core, “User-First” seems like a no-brainer: get employees to use your product and love it so much that they demand their companies purchase the upgrade.  But like most things, the challenge may lie in the details of the sales process; i.e. how does this approach align with a potential client’s buying process?  Good B2B salespeople have adapted their process to match their prospects’ buying cycles.  And in my experience the buyers like the process, control, security (and bureaucracy) that these cycles allow.

Products that decide to go “User-First” will have to learn these details and adapt their upsell process to fit in neatly with institutionalized buying cycles.  If they can’t do that well, “User-First” will simply be a fancy lead generator and sales talent will continue to be a requirement for B2B success.

Consumer Tech is Better Than Enterprise Tech

Chris Dixon asked this question in a blog post yesterday: why does most enterprise technology feel like it is a decade behind consumer technology? 

It's a great question and one I've thought about quite a bit.  I see so many sub-par enterprise products that are able to succeed simply because they have a strong sales force.   The enterprise sales model is such that one good salesperson can sell thousands of "users" just by selling one person on the product.  And because of high switching costs within a firm, these products are often very difficult to displace.

I posted my answer to the question in a comment on the post and Chris was kind enough to write a blog post about my comment this afternoon (the shout out is much appreciated).

It's nice to see that more and more companies are taking a "user first" approach to client/user acquisition.  If this approach becomes the norm, it should weed out the weaker technologies and allow enterprise tech to catch up with the slicker consumer tech we use today.  

Never Underestimate the Network

Chris Dixon likes to say that the next big thing will start out looking like a toy.

Some good examples are companies that are building networks on the web.  In the beginning, many web services can look like they’re serving relatively frivolous needs.  Sharing photos or music, booking reservations, writing reviews, playing games, shopping, etc.  It seems that most of the popular web services currently aren’t filling critical human needs and solving critical human problems.

But what all of these companies are doing is this: they’re building huge networks of individuals connected by common interests.  And the services that capture the critical mass of users in any given space are in the best position to begin to start to solve the more important problems of that space.  Many problems can’t be solved on the web until a strong network is built on the web

Facebook is a good example.  Today, it seems that they’re filling a somewhat unimportant need: connecting friends and providing entertainment (allowing people to essentially kill time).  But by building a platform that does these few things better than anyone else, they’ve built a network that is almost impossible to match or displace.  And it is this network that provides the foundation that allows web services to solve far more important problems.  I would bet a lot of money that ten years from now Facebook will be solving problems that we (and the founder) haven't yet imagined.

In short, the point of this post is to say be very careful of dismissing any web service that is building a network as just a toy.  It’s likely that they’re simply undershooting, or haven't fully realized, the full breadth of their users' needs and the problems their network can solve.

Healthcare & The Web

One of the things I'm a bit obsessed with is how we can better use the web to drive down the cost of healthcare.  With that in mind, I saw a post from Fred Wilson (the VC/Blogger) last week talking about healthcare and healthcare investment.  His simple point was that his VC firm hasn't found a large number of companies to fund in the healthcare space that fit their investment thesis.  In his words:

"But we haven't seen many large networks of engaged users emerging in healthcare. "

As usual, his post started a wave of comments -- 394 last time I checked.

Because I'm very passionate about this topic, I weighed in with my two cents and I thought I'd post my comment here (see below).

Over the next few years I expect that we'll see more and more companies using the power of the web (social, gaming, mobile, engagement, incentives, etc.) to address the healthcare problem.  And as a a result we'll see more and more capital (early stage and late stage) flowing into this space.

Evil Plans

I've always believed that most business books never should have been written.  Instead, the ideas in the book could have been summed up in a couple of blog posts or a long-form article.  I prefer to digest business content in the form of a blog rather than a book.  Too often business books are stuffed with superfluous examples and repetitive fluff in an effort to turn a somewhat simple concept into a 300 page, $14.99 book.  Like most people that are apt to read a business book, I don't have the time or the desire to read a lot of fluff.

Hugh Macleod, the blogger, artist, and writer must share this opinion.  He's an excellent business writer.  He writes a bit like he's paranoid that the reader is going to get bored.  He knows how to write books for people that are busy.  He makes short and simple points (often with a real life example) and moves onto the next thing.  He almost forces you to read faster than you normally would.  He did this extremely well in his first book, Ignore Everybody: and 39 Other Keys to Creativity.  Ignore Everybody was one of the best business books I've ever read.  It's full of insightful ideas that are communicated concisely, without the fluff.  I wrote a post on Ignore Everybody a while back where I called out some of the best tidbits.  I highly recommend reading Ignore Everybody.

Over the weekend, I finished reading Hugh's latest book, Evil Plans: Having Fun on the way to World Domination.  While not as insightful as his first, it's just as inspiring.  In short, Hugh asks his readers to develop and act on an Evil Plan.  What's an Evil Plan?  Hugh sums it up well in this line from the book:

"It has never been easier to make a great living doing what you love. But to make it happen, first you need an EVIL PLAN. Everybody needs to get away from lousy bosses, from boring, dead-end jobs that they hate, and ACTUALLY start doing something they love, something that matters. Life is short."

The book is written with a sense of urgency that suggests that the writer has some personal interest in getting you to move on your plan.  Now.

The book is a great reminder that with nothing but a laptop and an internet connection, we all have the power to shape our lives and careers and link up what we do each day with what we love and are passionate about.

If you're looking for a bit of inspiration to get off your butt and start moving on what you love, I'd recommend picking up a copy of Evil Plans.  It won't be a waste of time and I guarantee that it'll at least make you challenge whether or not you should be working on what you're working on.

eBay's Mobile Growth

This week TechCrunch reported that eBay is projecting $4 billion in Gross Sales Merchandise (GSM) for 2011 -- that is total sales volume through their marketplace, not revenue.  That's 100% YoY growth in that metric.

I'd estimate that they'll do about $80 billion in total GSM this year, which means that ~5% of shopping on eBay will be done through their mobile applications.  Mobile commerce is becoming real.

The article also notes that they sell 2,600 vehicles through their mobile application each week.  Mind boggling. 

A Daily Deal Bubble?

I was watching Michael Lewis on Charlie Rose the other night talking about his new book and the European debt crisis. I was most interested when he was talking about Iceland and their recent currency bubble that led to the collapse of all three of the country’s commercial banks.  He was explaining that, at one point, it got so bad that 30 year old fishermen that had never had another job outside of fishing were literally walking off of boats and into banks to take jobs trading currencies.  

When do you know you have a bubble?  When you have fishermen trading currencies for your country’s largest banks.

This leads me to the question of local daily deals.  Is this industry experiencing a bubble?  Is there too much investment?  Is it setup to fail? 

It’s hard to tell.  But take a look at this short list of companies that have built daily deal programs for their customers in the last several months. 

• BlueCross BlueShield Association
• NBC
• Time Warner Cable
• 95.5 KLOS (a radio station in Southern California)
• The Boston Globe
• Car & Driver Magazine
• Intuit
• Target 

For many companies this isn’t a huge investment and there are some synergies between their core business and daily deals; as an example, radio stations can use their existing sales force to sell a local deal as an add-on product for their advertisers.

But when health insurance providers and cable television companies are entering the space, it begins to feel a bit like a fisherman working the currency desk.  

My bet is that a correction is coming to the deals space.  The only question is -- when should we head back to the boats?

Going Mobile

I had some interesting discussions last week around mobile application development.  One thing that’s interesting about new and fast growing channels like mobile is that they cause entrepreneurs to develop products to serve the channel, rather than to build value and serve the user.  That is, businesses build apps to build apps, rather than build “products” that truly address critical unmet needs. 

For mobile to work, you must have a core proposition that works (very often, that proposition has very little to do with mobile). 

I built the following framework outlining when I believe web services should go mobile: 

1. More Exposure and Engagement: you have a product that works now on the desktop, you want people to engage ‘on the go’.  Action: build a mobile friendly website.
2. Better as an app: your desktop product doesn’t work well in a mobile browser due to site layout, widgets, flash issues, etc.  Action: build an app that gives users all of the functionality of your desktop site on their phones.
3. Must be an app: your product value proposition doesn’t work on the desktop (e.g. it requires geo-location, phone ‘bumping’ etc.).  Action: build an app and a desktop site to support user engagement.

Insulting Steve Jobs

I'm on a Steve Jobs kick lately; last week I wrote about how someday there may be statues of him all over the country. I came across this great video of him responding to an insult from someone in the audience at the 1997 Apple Developer Conference, just after he was renamed CEO.  If you listen closely, you'll notice that in his response he does far more than respond to the heckler.  He  lays out Apple's philosophy on product development that would fundamentally drive their outrageous success for the next 15 years.

Start with the consumer.  The consumer must drive the technology.  It's five minutes long but definitely worth watching.

[youtube http://www.youtube.com/watch?v=FF-tKLISfPE]

Google+ is Trying to Fix Social Networking

I’m a member of most of the big social networks (Facebook, LinkedIn, Twitter, Google+, etc.).  To me, the concept of online social networking is awesome.  Connecting and socializing through the web is a wonderful concept.  And it actually works pretty well in many ways. It’s incredibly easy to share online; nearly every website has “Like” and “Tweet” buttons and most sites are pretty easy to use.  And for the most part the people I want to share with are on the social networks I use.

But the thing that’s missing from online social networking, that makes it completely unlike real social interactions, is that there isn’t an easy way to share with discretion.

In the real world, using social discretion is extremely important and extremely easy to do.  There are things that I tell my best friend at work that wouldn't interest my friend from high school's mother.  There are things that I share with my high school friends that wouldn't interest my brother.  So in the real world, I simply don't share things with people that don't care about them.  This discretion is perhaps one of the most basic laws of social interaction.  But it's nearly non-existent in online social networks.  For the most part, when people share online, they share with everyone.

In the real world, sharing with everyone, without discretion, causes people to not like you.  Online, the lack of an easy discretion tool causes two other problems:

1. It creates a ton of "noise" -- unsolicited, superfluous information consumption
2. It prevents people -- especially adults, I would argue -- from sharing more online

Both of these are huge problems for social networking, and they're the reason I don't share more online.

It turns out that Google+ has a great solution to these problems.  They call it "Circles".  Take a look at the video below, it's only a minute.

I think Circles is a brilliant concept that has the potential to massively grow usage of social networks.  The challenge is of course that most people aren't on Google+ and I hear that ~80% of accounts are inactive.  Another challenge is that it takes a lot of time to build your circles and many people may not be willing to do that work.  Though I'm sure Google's technology and data could find a way to build Circles for you somewhat easily.

Regardless of whether or not Google+ takes off, the lack of discretion is the biggest problem with social networking and, in the long term, I'll be using the service that's easy to use, has the people I want to share with and facilitates simple discretion.