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.

Group Buying fortunes on the up?

After bottoming out during the past few months, the fortunes of some Group Buying businesses seem to be on the up, albeit a significant number have collapsed or been acquired in the past six months and the outlook remains grave for many more!

The fact that the sector’s nose is slightly up is in part due to the weeding out of weaker and often less scrupulous competitors who often served only to undermine the reputation of the sector as a whole.

In fact out of the 50 largest Group Buying businesses assessed in April, only 29 remain intact just 6 months on. And given only 10% (5) of those businesses were acquired that supports the view that smaller Group Buying businesses are of limited real value. In such a crowded and undifferentiated market lifesaving investment is tricky too given a lack of brand equity, good will or asset strength (off the shelf web sites are common and subscriber base overlap with top-tier competitors is often well over 70%) resulting in the collapse of underperforming and debt laden Group Buying businesses.

A quick browse through the sites of the 29 still standing uncovered indicators of pending doom for some.

Here are the choking canaries of the Group Buying world:

  • A high degree of niche product deals, such as robotic vacuum cleaners or iPad accessories
  • No sign of “number purchased”, an essential component of Group Buying that is quickly discarded when numbers are low
  • Extended Deal deadlines, this industry was founded on deal a day for good reason!
  • A smorgasbord of deals on one page, suggesting desperate recycling of old offers

Group Buying remains a $1bn future industry in Australia, regardless if that industry seemed to lose its way and stall when it was only half way there. Regaining lost momentum will be down to the leading players showing the way once again with a combination of brilliant marketing and a commitment to helping consumers discover great business products.

The strongest already have their playbook (Living Social, Cudo and Ourdeal) and will extend their positions in the coming 6 months through a focus on back-to-basics Group Buying offers like quality restaurants, high value vacation offers and utility products such as Cudo’s Meat Merchant.

Although I suspect another 15 from April’s top 50 will be gone by April 2013, leaving only a dozen or so standing, I think I already know who they are, I wonder if they do?

Is Privacy dead, or just too hard?

Lorrie Faith Cranor and Aleecia McDonald from Carnegie Mellon conducted a study recently which repositioned the lack of online privacy as a time issue.

They reported “To read every [online] privacy policy you encountered in a single year would take 76 work days……”

So we all want our time online to be a more private affair, but find it impossible to wade through the policies and figure out what’s what? Further, even if you had the time to read them, would anyone but a Privacy Specialist understand them, and worse, be willing to forgo the benefits brought by Facebook and Google in an effort to maintain some sort of online anonymity? I suspect not in each case.

It’s hard to see how to solve this issue.

At a minimum it would seem appropriate to provide a simplified privacy policy, which would at least encourage consumers to become familiar with the terms they are signing up to. Controlling what your cookies are used for may also be key, Personalisation, yes, targeted advertising, no.

Over time I worry that the role of government will be to reign in on the issue if left unsolved, which would be a bad outcome for all.

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.

What’s a great product without great service?

It’s rare that a great product would win without the support of great service, so why then are the two so quick to grow apart?

The problem, I think, is success.

Scale and its associated economies support the development of a product  but rarely do they support the development of the accompanying services. There are exceptions, of course, but not many; McDonalds is one, Apple another, Sadly I’m at a loss to think of a third.

It’s worth noting of course that Apple and McDonalds are are notable exceptions to the rule, albeit for vastly different reasons. McDonalds is a very, very large franchisor, and the “product” being sold does not come in a bun, the product is the Franchise. The Franchisee buys a proven recipe for fast food and efficient service. If McDonalds didn’t have control of the entire McD’s ecosystem through a tightly wound Franchise Agreement it would be impossible to maintain its brand of high-margin consistency that allows it to continue selling to franchisees at a premium.

Apple, on the other hand, is all about brand, and that brand extends through the product supply chain to the lifestyle, which includes the process of purchasing and ownership. Prior to Apple seizing control of its supply chain the service part was delivered by 3rd parties, now it is a powerful pillar in the house of Apple.

When a typical business grows, investment is poured into improvements in the production process, reducing the cost of goods and improving margins. The same can’t be said for service, great service at scale is costly, and returns to scale are minimal. In addition, training great service to new staff takes time, so the gap between product uptake and service delivery can grow rapidly if the growth was sudden and unforseen.

Improved margins are seductive, investments in service are not, and so the conflict begins.

As a business owner, you can get ahead. At a minimum there should be a record kept of a consistent service KPI such as Net Promoter that can serve as an early indicator of customer sentiment taking a turn for the worst. Where growth is happening at the expense of service the growth should be arrested until the issue is identified and resolved, hard as it may be to do so.

Positioning your entire business as a product is smart, have a McDonalds-like operating manual with detailed descriptions of service procedures and quality standards, or emulate Apple by asserting service as a key part of your brand, then live it with every touch-point!

To favour growth at the expense of service is a short term win, the positive sentiment that propelled growth in the first place is already evaporating, allow that to continue and chances are your brand will never recover.

Is your business suffering a Group Buying Hangover?

Group Buying helped good businesses access revenues that had previously eluded them, improving utilisation, buoying their P&L and promising a sustainable new revenue stream from this exciting new consumer channel.

But now that the sector has waned and desperate Group Buying businesses have become fixated on stack ‘em high sell ‘em low product chuff – those once buoyed businesses are left feeling a little queasy.

Just one of the problems they face stems from prepayment, one of the headline benefits touted by most group buying companies (including me).

Although quick access to cash is manna from heaven for most business owners, prepayment has left behind a tequila-like side effect.

The problem is this. A top priority for all online businesses should be around Funnel Conversion, i.e. the ability for the business to convert leads into dollars, however in a world of prepayment, conversion becomes somewhat unimportant. In fact, if breakage (unused vouchers) is a profitable exercise for the merchant, higher conversion may actually mean lower short term profits.

Now that Group Buying is providing an ever declining proportion of revenues, many online businesses that signed up to breakeven or lossmaking campaigns in order to grow their subscriber base, now find they are unable to monetize that base due to poor site performance, especially in the area of conversion.

Faced with lower than expected revenues, these companies often head back to Group Buying to find that like-for-like offers work only half as well as they did before. Now the business is in a pickle, the drug is half as effective, risk its brand by doing twice as much? Surely you know your drug dealer is never your friend?

The key is to get the fundamentals of your businesses working right before looking to Group Buying or any type of Marketing for that matter. Ensure that the purchase funnel is converting 60% or more of the people who hit “Buy Now”, that your Subscription Channel is effective, and your email strategy is delivering appropriate Open, Click and Purchase rates.

When cloaked by the shiny veneer of Group Buying dollars your site performance will look a whole lot better than it really is. Time to sober up, shake off that hangover and see if your bedfellow looks as good as you remember.

The seismic shift toward Online

I met with Business Spectator’s Alan Kohler and recorded an interview for Qantas inflight Radio in June. I was flattered to be invited to the show, the interview is now available below.

A link to the file is here.

Alan was particularly interested in a topic I have spoken about on a  number of occasions, the slow but steady adoption of the internet by all but the most tech-resistant and the impact that shift is having on traditional commerce.

Now that over 3/4 of the Australian population have a connection to the web, businesses of all types are finding that their typical customer is spending an increasing amount of time online and can be reached there quite cheaply for Brand building as well as ecommerce.

Two other significant factors beyond the amount of people online are – the nature of connectivity, i.e. fast connection speeds are no longer the preserve of early adopters – and that almost all internet users are willing to shop online, with only 5% of internet users showing concern about online security.

The shift towards fast access speeds has been so rapid that in 5 short years the issue of access for all has all but disappeared. Mobile internet use has also accelerated with many online businesses signalling that 10% or more of page impressions are from mobile devices and mobile transactions are catching up fast.

Where the online activities of the older demographics were once limited to banking and email, this is no longer the case. Over 20% of the discount shopping audience is 60+ suggesting that older folks enjoy the process of shopping online even if they don’t have to.

I think it’s fair to say that not being online in 2012 is akin to not having a mobile phone, at some point it looks a bit weird!

Meanwhile, as the Internet population has swelled to include your parents and most their friends, technology has evolved that enables Advertisers to single out their target customer and provide a customised offer on the fly – further extending the economic advantage of online commerce.

For the first ten years of the web the economic engine that powered its growth was display advertising (And subscription Porn but that’s another post!), publishers funded their growth by making money from page impressions – a refit of the existing TV and Magazine advertising model. In 2000 Google started selling ads in a new way – through search keywords which provided advertisers with a way to talk to customers based on what they were looking for, rather than what they had already found.

Now the model is shifting again, more people and more data means that publishers are now making an increasing portion of revenues from who you are, rather than just your location on the web. publishers can connect advertisers with their target Market with reasonable precision using browser tags. No longer are marketers confused about which half of their dollars are wasted, in the new world of the Internet, they spend half as much and almost none is wasted.

The rapid shift towards a more personal web has occurred in the past couple of years and the pace of change is accelerating. It was only 5 years ago that Facebook emerged as a public service, touching a Billion or so lives since.

The amount of change we see in the next 5 years will be as dramatic as the last 5, with an even greater emphasis on devices, mobility, personalisation and online commerce, bring on 2017!