Score Big with Rankings

We’re all familiar with the growing influence of user-generated rating sites such as Yelp and TripAdvisor. The power of these sites to determine which businesses thrive, while others struggle to stay in business, is well documented. Without a doubt, there is power in ratings and rankings. But you could be excused for thinking that this is all a very B2C phenomenon: consumers, retailers, restaurants and the like. After all, this is where all the noise and press reporting has been focused. But there are strong B2B opportunities in the world of ratings and rankings. And these opportunities don’t need to be at the scale of a Yelp or a TripAdvisor. Indeed, a simple list of the top players in a market can be absurdly influential, and where there is power and influence, there is usually also opportunity.

Consider this one compelling example. Bloomberg reports that two companies, Goldman Sachs and Morgan Stanley, were willing to forego millions of dollars in fees just to get credit as having worked on several large M&A deals. This “credit” in turn pushed the companies higher on a listing (often referred to as a league table) of the companies handling the most M&A transactions, and published by a third-party company called Dealogic.

Step back and consider, even savor, this for a moment. Two prestigious, successful and extremely savvy companies that hardly need more publicity or name recognition, are willing to trade millions of dollars in fees to push themselves higher in a list that ranks transaction activity. Clearly what’s going on is that these companies feel that the bragging rights and marketing value of ranking highly on this list will be worth many more millions that those they walked away from.

Now you may be noting that Dealogic, the transaction platform and data company behind this league table, didn’t see any of the millions of dollars. But monetization isn’t always direct. And in the case of the league table in particular, it shouldn’t be.

But let’s tally up the benefits to Dealogic. It certainly needs name recognition more than the big name companies in its ranking, and it gets that recognition in spades as the producer of this important list that drives deal activity. Secondly, the league table is inherently a highly summarized product. Dealogic can easily sell the underlying data at a premium price to those who want to do more granular analysis. Third, the league table has a halo effect on other Dealogic products. As a producer of critical industry data, every Wall Street player will be receptive to hear about all the other products and services that Dealogic offers. Indeed, many of these Wall Street players will be regularly reaching out to Dealogic to make sure they are properly reflected in these league tables. As a neutral producer of this relatively small dataset, Dealogic has built strong market authority and credibility, and is able to reach and sell to the biggest names on Wall Street more as an equal than an obscure vendor.

The power of rankings and ratings is undeniable. But the really important lesson here is that the rankings don’t have to be elaborate, and the market doesn’t have to be huge for them to yield outsized benefit.

Got Klout?

Imagine a business based on a mash-up of social media, analytics and ratings. And that's exactly where a company called Klout plays.

Klout exists to assess your social media importance. Using advanced algorithms, it looks at how active you are in social media, how big your audience is, how influential are the people in your audience, and the impact of your social media activity. All this gets rolled up in a Klout score - a number from 1 to 100.

If this sounds like nothing more than an interesting academic research exercise, you might be surprised. Klout reportedly has over 5,000 large companies tapping into its database to determine who really matters online. Uses are varied and fascinating. PR companies use Klout to assess whether or not to personally engage with someone who has made a negative online comment about a client. Marketers are creating customized pitches to those with the highest Klout scores in the hopes of engaging with them and getting them to talk to their audiences about their products. And this is just the tip of the iceberg in terms of potential applications. Consider, for example, that Klout has already built a connector to Salesforce.com.

In terms of potential applications, some are cutting edge, but not all are necessarily positive. There are numerous reports floating around of people applying for jobs and being rejected due to low Klout scores. Some hotels reportedly will look up your Klout score at check-in, and provide free upgrades to those with high scores, presumably in the hopes of favorable online mentions. Similarly, Cathay Pacific airlines will make its San Francisco frequent flier lounge available to anyone with a high Klout score - regardless of what airline they are flying. The objective again is favorable mentions.

Implications? What we may be seeing is a devolution in advertising where marketers move to a bottoms-up approach to distributing their messages, with the hope that they can achieve powerful and cost-effective reach by having a small group of individuals amplify their brands and their messages for them. This could have serious impact on those that make money today by aggregating fixed audiences.

Of course, as the rewards for having social influence grow, so too will the number of people gaming the system to improve their scores to reap all these upgrades, free samples and attention. As these activities accelerate, social media measurement could end up getting so polluted and undependable that it becomes too difficult to isolate true influencers, likely a fatal blow to this innovative new marketing approach. Alternatively, Klout, like Google, could try to keep the game going by regularly tweaking its algorithms to maintain its value. But as we add the wisdom of algorithms to the wisdom of crowds, are we really getting any smarter?