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How Zillow Spends Zero on Advertising

Doubtless everyone reading this is familiar with Zillow. We honored them as a Model of Excellence in 2006 .

They’re now a real estate listing behemoth that sports a market capitalization of $5 billion. We all know what Zillow does and how successful it’s been. But did you know that Zillow launched with virtually no advertising budget?

In a fascinating interview, Zillow’s Chief Marketing Officer, Amy Bohutinsky, explains Zillow launched with the classic “sell data with data” strategy. Using data to promote your data is – unsurprisingly – a marketing tactic available only to data publishers. And it’s a tactic well worth exploiting to the maximum.

Zillow launched itself with press releases aimed at the consumer mass market. It offered free access to data that was catnip to almost every consumer: instantly find the estimated value or your home, or anyone else’s for that matter. Zillow, after collecting and normalizing property assessment records from all 50 states, had developed an algorithm that looked at recent sales and area demographic data to calculate a home price valuation. Sure, it was necessarily imperfect, but the data was credible if not authoritative, comparable (all homes were evaluated the same way) and of course free. This quickly drove millions of page views, allowing Zillow to execute on its business model of selling listing enhancement to real estate agents.

But Zillow didn’t stop with this single gambit. Instead, it allowed consumers to sign up to receive email updates to their home valuation – every time the estimate changed, Zillow would send an email. This created critical ongoing engagement (important because the average person doesn’t buy or sell a home all that frequently), brand enhancement, and an important advertising vehicle (the email also presented information on nearby homes for sale).

Beyond this, Zillow regularly mines its own data to find newsworthy statistics that keep its brand front-of-mind and implicitly credential it as an authoritative and central industry player. It issues press releases on everything from the standard reports on where homes are selling most quickly and slowly, to offbeat data on the “10 biggest homes” or “10 most expensive homes,” and the like. Obviously there’s no shortage of material.

As we noted earlier, you’re most likely to get media coverage if you can provide facts and statistics. That’s hard news as opposed to opinions or transparent gimmicks to try to attract attention. More importantly, every piece of data you release reinforces your central market position, your authority, your knowledge and your expertise. You become generally understood to be the “go to” place for data in your market. There’s no better positioning than that, and best of all if you do it right, it’s practically free.

You can hear how another Model of Excellence winner, Capterra,  pulls of this trick when its CEO Mike Ortner joins us for our infamous “Excellence Revisited” panel at this year’s Business Information and Media Summit. Hope to see you there.

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The Macro Problems with Micropayments

Micropayments companies – companies that make it somewhat faster and easier to purchase small units of content such as a company profile or an article – have existed since the early days of the Internet. You may remember names such as First Virtual, Cybercoin, Digicash, Millicent, Payword, Micromint … and that’s just a partial list. And despite a raft of failures in this space, new players keep coming. For example, a start-up called CoinTent just raised $1 million to pursue its vision for micropayments.

Why are micropayments so hard? I see two primary issues. The first is in establishing market traction. A successful micropayments play needs to not only get a lot of users, its needs to get a lot of publishers, and it needs to grow both sides simultaneously. Moreover, there needs to be a big overlap in terms of interests. I’ve always thought a B2B micropayments start-up might succeed more easily than a broad-based B2C micropayments venture. But then I look at my own web research habits: I’m all over the web, and the content I am most willing to pay for is typically the most obscure. Even if a micropayments company could sign up 10% of online content providers, an unimaginable percentage, it wouldn’t much simplify my life.

More subtly, and more significantly, is the natural hesitation about buying something that the seller won’t show you in advance. Content is an experience good – you can’t assign a value to it until you’ve seen it. And of course, content providers can’t really show their content in a meaningful way prior to the sale. Over the years, I have purchased “articles” that turned out to be 24 words long. I have bought “books” that were 14 pages. Of particular concern to data publishers, I have purchased company profiles that contained little more than the company name and address. It turns out this data publisher had a lot of detailed, high value company information, but on only some of the companies in its database. And it’s not just an issue of length or depth. I have purchased journal articles that were quite lengthy and detailed, but that touched only fleetingly on the topic I wanted to learn about, something that’s very difficult to discern in advance.

In short, micropayments for content is hard, because there’s so much content out there, and the inherent need to say “trust me” to potential buyers. At least at this stage of development, micropayments don’t look like a big opportunity for content publishers, data publishers in particular.

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Tapping Into Phone Data

For all marketers, B2B marketers in particular, the telephone has long been both a great friend and a big problem. Telephones are a great friend, because someone who calls you, particularly if it’s in response to your advertising, is a top quality prospect. At the same time, telephone calls resulting from ad campaigns have remained difficult to count, measure and evaluate.

And it’s not for lack of trying. I go back in this industry long enough to remember the glory days of “key phone” numbers. In essence, publishers would convince advertisers to use a dedicated phone number in each ad campaign as a crude way to track results. This approach worked, but because they really only yielded call counts, all they could do is prove a point for the publisher. Key phone yielded very little insight into the nature and quality of these calls.

Lest you think key phones are a dated concept, it’s interesting to note that this is essentially what Google is doing with its recent launch of call tracking for AdWords. Intriguingly, Google hasn’t really advanced this technology much – it’s all about using dedicated phone numbers to count the calls generated by your AdWord campaign.

Yes, for 30 years, call tracking technology hasn’t advanced very much. At least that’s what I thought until I recently ran across a company called Convirza.

Convirza offers basic call counting. But it goes much, much further. It has developed software that analyzes every incoming call (most companies already announce that incoming calls may be recorded, putting to bed any privacy issues), actually listening to each call to provide a call quality score. It can measure the outcome of the call, presumably by listening for keywords, to measure call conversion rate. It can even flag calls where it feels the salesperson left money on the table by not trying to upsell or cross-sell the customer. More generally, it can provide a quantitative assessment of the quality of each salesperson’s selling skills.

But wait, there’s more. Convirza integrates with marketing automation software, and can even be used to adjust online ad spending in real-time. If a particular program is generating a solid percentage of calls that convert, that program can be immediately scaled up.

This isn’t even everything that Convirza does, but you get the idea. By analyzing and deconstructing recorded phone conversations, Convirza is generating high-value, actionable data where none existed before. And stunningly, it’s left Google in the dust, because while Google is fine for counting calls, Convirza solves for the “last mile” problem: whether or not that call converted.

We should follow Convirza’s example and expand our thinking about how to extract data from unconventional sources to solve real-world business problems. It’s also a technology that advertising-based publishers could likely adapt to provide not only proof of performance, but a remarkable level of added value to their online advertisers.

Making Music

I’ve been impressed and entranced by the music service Pandora since I first ran across it several online lifetimes ago in 2007.

Two things particularly impressed me about Pandora. First, unlike services such as Spotify that allow you to access music you already know about, Pandora was the first large scale attempt to offer music discovery. Enter the artist or tracks you like most, and Pandora would find more music that was similar. Normally you would expect to learn that Pandora is powered by cutting-edge algorithms.

In fact, Pandora is powered by humans. Music school graduates. Many dozens of them, all methodically classifying individual songs against a master taxonomy of over 400 characteristics. It’s an expensive approach, but it’s organized and returns consistently high quality results. And while Pandora continues to struggle from a profitability standpoint, nobody argues with the quality of its service.

But what if you could create a Pandora-like service without the high labor costs? That’s what a company called 8Tracks set out to do.

Rather than having a paid staff categorize music, 8 Tracks went the social media route. Everyone was invited in essence to become a DJ, and upload their own song lists to the 8Tracks site. These playlists were organized via tags, so users could discover music based on mood or musical style, for example. If users like particular playlists, they can follow the people who uploaded them in order to see all their new playlists right away.

8Tracks is unquestionably providing a music discovery service, just like Pandora. But it’s a fundamentally different experience. Pandora is dependable, seamless and efficient. 8Tracks is hit-and-miss, time-consuming and requires lots of user interaction.

There’s room for both services in the vast music market and indeed, both services have many enthusiastic adherents. Yet by looking at both services side-by-side, you can see the strengths and weaknesses of user-generated content very clearly.

Music is entertainment. There’s no risk or consequence if you don’t discover a certain song by a certain artist. But when you move into the realm of business information, that dynamic changes. Suddenly, getting the right answer starts to matter a lot. That’s where user-generated content can come up short. Users generate whatever content they want, whenever the want, for as long as they want. You have little control. User-generated content works best where there is a massive volume of content (think Yelp or TripAdvisor) and the correct answers will win out, or in situations where there is no alternative information source, making your content the best that is available. But when the quality of your content matters, social approaches to content creation can yield decidedly off-key results.

 

Value Versus Volume

A recent article in Digiday entitled “Why publishers struggle to monetize their paywall data” lays bare one of the great inconsistencies of the digital marketing era: despite the ready availability of great targeting data, advertisers and their agencies still put more emphasis on quantity than quality.

Don’t get me wrong: advertisers want to target their messages, and will pay a premium for the ability to do so. But they also want push-button simplicity, which invariably means they favor those with the largest audiences and the biggest networks. A single price, a single invoice, easy management and analysis: that’s what advertisers seem to value most highly. If the audience quality isn’t quite as good, it’s still worth it to them.

And thus it has ever been so. In the heyday of postal direct marketing, everyone talked quality and sold quantity. Back then it was the tyranny of per thousand pricing at work. If you sold your product at a per-thousand rate, you had to move a lot of volume to make meaningful money. Indeed, the clever publisher who could identify 50 perfectly targeted prospects for an advertiser probably couldn’t even sell those names at any price – it was just too much work in an industry that tested its lists in quantities of 10,000 names.

Online marketing and improved user data was supposed to change all this. And to some extent it has. We now have a bifurcated publishing world with some publishers still selling their audiences on a cost per thousand basis, forcing them into a world of almost unlimited supply, meaning low prices, meaning they have to still make their money on volume. Quality occupies a tenuous position in this business model.

The other group of publishers has changed their focus to lead generation. By using a variety of different approaches, these publishers get individuals in their audiences to raise their hands and indicate they are likely buyers of a particular product or service. An individual lead can sell for a lot of money, and this has allowed publishers to move away from commodity selling with per thousand pricing.

And this would ordinarily be a happy ending, except that advertisers are now demanding their sales leads in quantity. They’re indicating it’s not worth their time to work with publishers that can’t reliably generate a certain quantity of leads per week. Once again, quantity is starting to take precedence over quality. What makes this even more odd is that many advertisers are gorging themselves on sales leads, buying so many that they can’t handle them effectively without expensive marketing automation software that itself demands more and more leads in order to work effectively.

The seemingly unavoidable conclusion from all this is that most advertisers aren’t really that good at marketing and sales. If correct, it seems logical that publishers should assume more of this role for them. And indeed, we are seeing movement in this direction with growth of marketing services, content marketing, lead qualification and appointment setting – all things that arguably roll up into what’s being referred to as the “full stack” business model.

If things play out this way, we’re looking at another round of profound, wrenching change for the publishing industry. At least with this round of change those who survive it will seemingly emerge with strong, high-value businesses and bright prospects.