The bigger they are…

Apple has a long way to fall

The mocking began almost three years ago today. Apple Fan boys & girls chorused in smug, urbane disdain of my Apple hate. How I dared question the gospel according to Jobs.

Well, I did.

In March 2010 I wrote, “Increasingly, fashion’s undesirables are adopting the iPhone as their key to cool, just as the true cool are heard to say “it’s just a phone, I’ll change it soon”. iPhone has some runway yet, there are a few hundred million people still to buy one meaning Apple have at least a couple of years of stellar revenues to look forward to from their phone division; but when the fickle face of fashion is looking the other way, what damage will have been done to the broader Apple brand?”

Right now, the Kids are buying Samsung’s range of Android powered devices, they are unmistakably cool. Parents of those same Kids are “doing Facebook” on iPhones, and there’s nothing cool about that!

The challenge for Cupertino is in the awesome strength of the Apple eco-system, the all of nothing iTunes lock-in they so clearly hoped would bind Appleites to polished metal and white doesn’t work when they have found religion elsewhere.

Losing Mobile Phone share and therefore command of the users’ Media collection undermines the entire Apple product range as well as the economic model – meaning the whole business is on very shaky ground if can’t reverse its fortunes, and fast.

I foresee a very rapid demise ahead for the once mighty Apple, truly a victim of their own incredible success.

Turning Advertisers off with visual Vomit

As a user, Facebook is frustrating, and as an advertiser, it’s downright useless.

Humans are skilled at ignoring the visual vomit around them, and these are skills that have been perfected over many years of increasingly desperate advertising techniques – from the subliminal to the ridiculous.

Stealing 5 minutes to get critical updates on the latest cat meme is what Facebook is all about, and monetising that experience has mostly been limited to targeted advertising (selling your personal details to advertisers so that they can craft ads most likely to drive a response). But with just $10 of annual revenues from each of its 600m or so engaged users Facebook has a long way to go to satisfy its many Shareholders’ many expectations!

The real challenge for Facebook though is that economically it’s still a One Trick Pony with 8 out of every 10 dollars of revenue coming from advertising. So how does Facebook outgrow the rebounding economy in order to drive up shareholder returns?

I think they have three pillars of advertising growth ahead of them, each of which will likely trade off user experience for advertiser revenue:

More advertising inventory – as the rate of subscriber growth slows more inventory is required to avoid an overall slide in the supply of advertising space – meaning more of the Facebook page will be dedicated to paid media resulting in a poorer user experience

More personal advertising – Facebook will give as much data as it can to advertisers to make the advertising product more effective – meaning Facebook will go even further to leverage their users’ personal data

More interruptive advertising – as consumers get better at ignoring the Advertising Vomit, Facebook will push its products to become more interruptive, meaning you have to wait for them to finish or actively “push” them out of the way. A poorer experience but one that is likely to yield more clicks for the advertiser.

And yet, the real challenge here for Facebook is that it just isn’t a great place to advertise for most businesses. It’s neither a great Brand advertising platform, nor is it a great Performance advertising platform – and in this analytically informed world of Marketing, the investment required to evaluate the effectiveness of an advertising platform is lower than ever before – meaning most big advertising dollars have already come and gone.

Spreets goes Hybrid in a desperate move that might just work.

Spreets recently announced their plan to include offers from competitors alongside their own, making spreets.com.au the first major player to launch a hybrid Group Buying/Super Affiliate offering in the Australian market.

I imagine the evolution of their model went something like this:

Early 2010: Spreets is formed and is among the very early entrants into the Australian marketplace, their model closely echoes the fast growing US originator, GroupOn.

Middle 2010: Spreets finds early success with a single deal each day, deals are sold at 40-50% revenue share to Spreets and consumers are excited about the new model, each offer sells many hundreds of vouchers, competition is light and shareholders are happy!

Late 2010: A number of new entrants intensify competition, including well-funded overseas players GroupOn and LivingSocial, local Catch group player Scoopon and of course Cudo who brought TV advertising to bear for the first time. Spreets immediately lose marketshare to these new upstarts, unsettling shareholders and peaking the interest of Yahoo!7, the natural rival of Cudo shareholder ninemsn. A second “side deal” is now commonplace on Group Buying sites, providing an alternative to the main offer of the day. Revenue shares of 35% are also now common as competition intensifies and daily deals businesses battle to win the best merchants.

Early 2011: Spreets is bought by Yahoo!7 for just over 22m, an incredible outcome for the Spreets’ co-founders and investors. Interestingly, a higher purchase price was touted ($40m) as the new owners congratulate themselves at having managed to jump on the fastest of bandwagons (myspace anyone?). The model has evolved to include 5 or more daily offers, vacation offers and longer running offers. Revenue shares of 30% are common.

Late 2011: Some 80 competitors exist in the market and Spreets market-share has flattened to 12-14%, products offers become frequent often at under 15% revenue share for the Group Buying business, customer discontent is at an all-time high due to shoddy product suppliers failing to deliver and 20+ daily offers are now common resembling a deal marketplace and requiring an increasingly large and expensive sales force to meet that demand.

2012: 2012 was make or break for many group buying businesses with a large percentage falling away in the second half of the year. Average revenue shares of 25% are typical and with 50+ daily offers on each of the larger group buying sites the average voucher sales per offer has declined significantly making it hard to fund the sales force required to meet the demands of a deal marketplace.

December 2012: Spreets calls it quits on the Group Buying model deciding to give the Hybrid model a go instead.

For many, the economics of a deal marketplace don’t stack up, which seems to be the case for Spreets. Meeting the demands of a marketplace without the overhead of a large sales force is possible though if competitor deals are surfaced alongside those deals originated in-house as a Hybrid affiliate/group buying business. Doing so can be profitable too, Affiliates are commonly paid 10% of gross revenue when a new customer is introduced, or almost half of the revenue retained by the group buying company, which is a good bounty given no sales effort, customer support or refunds and no exposure to shoddy merchants!

Assuming their Group Buying competitors sign up to having their offers surfaced on Spreets.com.au deal choice on the site will grow and no doubt customers will thank them for it. But what is the long term outlook for this Hybrid model?

Spreets customers will be absorbed by the competition over time, Spreets will already be losing 4-8% of Subscribers each month though natural churn and may not have the funds to replace them so a customer exodus to the competition will hurt greatly. The more successful the Hybrid model is at generating Affiliate fees the more quickly the exodus will occur and unless they can make their marketplace a great destination through the curation of compelling deal content and email targeting/personalisation they won’t come back either.

Alternatively this may be Spreets way of simply “milking the asset” until they close the doors on the business given this model will lead very quickly to some much needed profits, given their original investment it would be nice to see some return!

Click Frenzy, in spite of the massive failure it was an unprecedented success!

Sneeze and you may have missed it.

The Click Frenzy frenzy came and went in a matter of days, yet in that time it managed to reach the consciousness of some 20% of online Australians! That’s quite an achievement.

Their PR machine had triggered something in Australia’s uber-price-sensitive media which led to an incredible amount of coverage in the days leading up to the sale – it really did become a frenzy.

Even before the site ran into capacity issues on their woefully inadequate servers, their business model meant they would only ever make moderate returns. Choosing an all-up-front fixed-fee suggested they doubted the results they could yield for their retail partners preferring instead to cover their costs and hope for a modest return.

All in all, they clearly had no idea how ready the Australian market was for Click Frenzy!

Click Frenzy founder Grant Arnott explained in a rare and touching mia culpa that 300k visitors was their top traffic estimate, so the 1.6m visitors they actually saw blew their infrastructure wide open. To be fair, I think only a handful of sites around the world would cope gracefully with 1.6m concurrent users! The fact is the 7pm launch time was a big part of the problem, internet infrastructure hates concurrency!

Aside from the access issues suffered by many hundreds of thousands of bargain hungry shoppers, many found their way to the registered retailers and boy did they spend!

One retailer example I was shown paid less than $3,000 to participate but yielded over $80,000 in sales. An equivalent Group Buying offer would have cost the business $24 – 30k in commissions! A pretty good outcome for the retailer!

The chart below from Quantium shows the direct impact on participating retailers versus non-participating retailers.

160 retailers of varying sizes participated, and Click Frenzy probably netted an average of 3 – 5k upfront from each, meaning 480 – 800k in Gross Revenue. Not bad, however had they chosen to take a booking fee plus a moderate trailing commission, they would have netted anywhere from $800k ($1k upfront, 5% commission on $80k Average) to $2.4m ($1k upfront, 15% commission on $100k average)!

All credit is due to the Click Frenzy team, they were swept along by a frenzy of their own making albeit they we flattened in the stampede. Better luck next year.

Good commercial sense underpins sustainable philanthropy

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In 1999 the ever cheery Brits (of which I’m one) were flabbergasted when their #1 Son Richard Branson lost a bid for the National Lottery. His manifesto for the People’s Lottery was based on it being run as a Not for Profit meaning that profits would be provided as donations to the lottery commission over and above the standard fun-raising efforts of the National Lottery. Even though these additional donations would exceed $1bn each year the Lottery Commission said no, instead they chose Camelot who had no such altruism in mind.

Surely something’s afoot, why would the Purpose driven Lottery Commission choose greedy toes Camelot over goody two shoes Branson? Isn’t that Greed before Good?

Not that simple.

The Lottery Commission figured that without the benefit of a Profit Engine behind Lottery Ticket sales, they’d be worse off taking the $1bn contribution from the Virgin effort. That their interests would be misaligned and the overall donation pool would be smaller as a result. A decision that has since been vindicated several times over.

If the collective interests are balanced, doing good doesn’t have to be unprofitable.

Recently I co-founded a business called BeyondCover. On one hand BeyondCover is an Insurance reseller for Global Underwriter QBE, selling CTP (The mandatory Motor cover in Australia), General Motor and Travel Insurance, on the other hand it raises money for causes by rewarding Cause partners when they introduce a new Insurance Customer.

The key to having the right incentives in place lies within the nature of Philanthropists. People who regularly support Good Causes are good people, they take fewer risks, cause fewer accidents and pay their bills on time. They make pretty good Insurance customers too!

Big companies can’t win, time to get down and dirty!

Reinvention is bloody hard, rarely has a big business managed to pivot wholesale to a new them without causing a catastrophic collapse of their core along the way. History is littered by once great corporations hollowed by their failure to recognise the need for reinvention.

But this isn’t a cautionary tale featuring Kodak and their resistance to the Digital age, although that is a good story! This cautionary tale concerns those businesses that recognise the need for change but fail, fail because their big company DNA rejects the wide eyed organism growing within.

Clayton Christiansen describes the issue as the Innovators Dilemma. The central theme of his argument is that big businesses innovate within the constraints of their own expectations. Big business’ expectations demand an aggressive and predictable return on capital as well as a degree of polish that small businesses and startup entrepreneurs happily live without.

Those expectations limit their ability to innovate to the Sustaining kind only, meaning incremental improvements that result in incremental bottom line impacts. The new breed of competitor, i.e. startups, don’t live with those constraints and can therefore galvanise their new business around an untested way forward.

Innovation favours the brave and startups are certainly brave. Entrepreneurs often leave themselves with little to lose and can afford to turn existing models on their head in a effort to break through. And breakthrough they do.

In the past big corporate goliaths still won though, regardless how stilted their innovation; barriers to entry and scale benefits afforded them a dependable lead against newer foes. But today’s David is better equipped. They have the triple whammy benefits of low cost of capital, cheap scalable technology and affordable access to a large audience; also, this new wave of Disruptive Innovation is easily embraced by customers so should be feared by slow to move businesses and their shareholders alike. Boardrooms have too much as stake to stay ignorant to the Breakthrough Innovation occuring around them, so breaking through the innovators dilemma will have to happen eventually. But there is a great risk of too little too late.

Corporate leaders have to do more to embrace breakthrough thinking and create structures to do so. Establishing a mini startup fund and incubator for internal entrepreneurs and staff incentives to encourage broader thinking are essential steps. Communicating to the broader business the importance of supporting those innovations by accepting the quick and dirty necessity of breakthrough thinking is also essential if rejection of the new organism is to be avoided.

Google Analytics – Top 3 Features for Ecommerce; A Digest

This post was written by Boris Gefter – freelance Acquisition Guru and consultant to 57 Signals.

Google analytics (GA) is rubbished more often than not by Omniture diehards and hardcore data analysts. They bleat persistently about their inability to feed GA with non-standard data (outside the scope of what the javascript captures) and readily extract the data (in the way you can with a data cube). But these guys are locked in time, probably still awaiting the arrival of the iPhone 3!GA has evolved in a fantastic way over the past 3 years! In its evolution it has made available rich data to those that care to harness it. But what is more impressive, is how easy and intuitive it is to use the interface and find answers to questions a sophisticated online store owner may ask. But, let me curb my Google appraisals for the time being, lest this blog post be censored by the powers that be. 😉

Jumping right in, here are my three favourite GA features (and there are many!)

1. Google URL Builder.

A humble servant of GA’s ability to capture and store url parameters. It is surprising how many people do not know that this functionality exists! The standard user will be used to viewing the “Traffic Sources Overview” report, but when you want to know what campaign, keyword, ad or placement on which network and partner has resulted in a sale, coding your own unique URLs could not be easier. Then, when it comes to retrieving this information, you can rely on your friend ‘Custom Reporting’….

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2. Custom Reporting:

The humble tab that sits atop the interface is the key to unlocking analytics glory. For those that know and love pivot tables and data cubes, GA has a gift for you. For those that are new to looking at dimensions and metrics, they key is not to be intimidated by the blank canvas. Start playing around, adding metrics (things that are measurable) such as time on page or conversion rate (if you have ecommerce tracking enabled) is really easy. Dimensions (what describes the data) can be configured to retrieve information that you coded into the Google URL builder in step two, by adding “Source” and “medium” alongside the metrics you are interested in.

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As an example, say you wanted to find out how successful your google adwords campaigns are (which you had already coded with the url tool, as seen above), you can simply add source as one of your dimensions and the relevant metrics such as visits and number of transactions as shown in this example. Then, you can filter by the source code which you coded in your URL tool.

The key, is figuring out what question you want to answer first, and then what sort of information will help you answer that question, then validating any data using common sense!

3. Conversion Segments/The Repunzel Report:

What if I told you that you were potentially losing out on more than 50% of your revenue by under-investing in a particular form of advertising. Wouldn’t that be valuable? This is where the “Conversion Segments” or “The Repunzel Report” as I have dubbed it (due to the fact that it is hidden in the top left corner of the analytics tower) becomes extremely valuable.

First let me assist the budding princes willing to use this report. You need to have ecommerce tracking enabled and implemented correctly on your site, then you can make your way into the conversions tab>multi-channel funnels>top conversion paths, then navigate to the top left section of the page to find conversion segments. Simple, right?

Now that you have found it, you can filter the potential traffic sources by first and last interaction. Whilst, the philosophy of attribution can be a prickly one, I like to refer to reports such as these to understand where advertising money is going and how much impact it is having.

What you can see from the example below is that paid advertising on a “last touch” basis, is reporting $140k+ worth of revenue, whereas on a “first touch” basis (where the value of the transaction is attributed to the first channel that brought the customer to the site in a default 30 day window) there is over $220K+ worth of revenue to be had. Now imagine that you are only spending $100K on advertising, thinking that it is only bringing in $140K, when, if you look at your conversions through the “first touch” lens, you can see that there is potentially more value to be had from your advertising dollar!

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I often like using first touch attribution to model the efficacy of acquisition channels because it is simple, and usually rather effective. This model can become complicated by things like remarketing and more diverse marketing channel portfolios. But, hopefully, this report will, at the very least get you thinking about the complexity of multichannel advertising interactions and spark a discussion about what is the right approach for your company in modelling and tracking conversions.

As much as I love diving into data and exploring new features of GA, I am always weary of tempering my enthusiasm to extract findings with solid statistics, common sense and other analytics tools (where possible). Having noted this, it is very easy to become intimidated with analytics tools and software. Which is why, often there is no substitute for simply getting your hands dirty with what tools like GA have to offer. I hope this post helps to make some of the less accessible features of GA more manageable.