Get Real
In its recent issue, BtoB Online discusses the growing excitement among B2B marketers about the powerful advertising affect inherent in "word of mouth."
It's long been known that word of mouth is a potent force. What dismays me is that once again, marketers are off chasing another trendy fad and trying to turn something natural and spontaneous into something that is mechanical and artificial. It's not that I am a purist; rather I simply don't think it can be done successfully.
Think about your own experience with word of mouth "advertising." Yes, there is some value if a friend or associate alerts you to something new. But the real power of word of mouth is when your friend or associate actually endorses something – putting their good name and reputation behind a product or service. That's why advertising agency campaigns that get people to merely pass around funny videos to their friends falls short. This may qualify as a form of viral advertising, but it fails to deliver an honest, objective endorsement, so as word of mouth advertising it hits far short of the mark.
It's the same thing with buzz, that mysterious point of critical mass when the world seems to be looking at you because enough influential people have chosen to talk about you at roughly the same time. This excitement about the power of buzz has spawned companies that claim they can manufacture buzz for a client on demand. I submit that whatever these companies can deliver in terms of buzz can only be a pale imitation of the real thing.
I have the same issue with the concept of community. All publishers know it's a good thing to create online community because it reflects loyalty and builds traffic. Yet, like buzz and word-of-mouth, I don't believe you can manufacture community. The communities that are real and worthwhile are driven by enthusiasm, deep interest, needs and passions. You can't fake that.
Rather than spending our energies trying to manufacture things whose power lies in the fact they cannot be manufactured, we should simply stick to the knitting. If we are creating information products that our customers really want and need, delivered in a way that is truly useful and valuable, then we've set the stage for buzz, word-of-mouth and community to happen naturally. If they don't, you've still got a viable, profitable product delivering value to its users. And you can't get more real than that.
Does CPA Add Up To Trouble?
News is flying across the blogosphere that Google is testing a new advertising program based on "Cost Per Action" or CPA. The implications are potentially enormous.
In the current model popularized by Google, both Google and its publisher affiliates get paid when a user clicks on an advertisement. It doesn't matter if the user does anything more than click; Google and its affiliate publishers still get paid. There are two main flaws with this model. First, advertisers who think they are so clever because they are "paying for performance" often find they rack up big bills with little to show in the way of increased sales. Second, the model is wide open to fraud.
This new CPA model addresses both these issues. To get paid, the user will not only have to click-through, but take a specific next step such as registering, requesting more information or making a purchase, all in the same user session. It's virtually fraud-proof, but the message it sends to advertisers is something of a two-edged sword.
The first is that clicks alone don't count. That’s wonderful news for smaller, focused B2B sites with real, repeat traffic from qualified users interested in a specific industry or topic. It's bad news for those who have gotten good dragging vast numbers of visitors to their sites by hook or crook.
The second message is that it is now okay to pay only when something concrete happens. Google's huge success with pay-per-click advertising revolutionized the advertising business by forcing inappropriate ROI metrics onto advertising, and shifting advertising risk from advertiser to publishers. Well before this Google test, we detected a distinct trend among advertisers to ask for the logical next step in this progression: pay-per-sale. Google will now be teaching advertisers that the smart way to advertise is to only pay when something happens. What "something" do advertisers want most? A sale, of course. This could easily get out of control.
It may have been fair to re-balance advertising risk between advertiser and publisher a bit, and pay-per-click did just that. But pay-per-sale goes too far. Can any publisher build a business that depends on the ability of the advertiser to close a sale? What if the salesperson is the slacker son-in-law of the owner? Do we only get paid if he decides to show up to work, actually responds to an inquiry in a timely fashion, can make a coherent sales presentation, and is able to offer the right price and terms?
If CPA takes off with advertisers, and I think it will, we have to watch it closely. If it remains limited to publishers getting paid (hopefully a lot) for generating hard sales leads, that's one thing, and a number of us could do quite well in this environment. If it morphs (as I predict it will) to advertisers demanding to pay only when they make a sale, we as an industry have to draw the line. The purpose of advertising is to stimulate interest, not guarantee profits.
Net Neutrality: Paying the Piper
There's a huge amount of noise surrounding proposed legislation now in Congress that addresses so-called "Net neutrality." Like so many things these days, this catchy term means different things to different people, vastly complicating the debate.
There are several different issues marching under the banner of Net neutrality, but the one getting the most attention is the idea that the Internet will, in effect, be split into a fast lane and a slow lane, and anyone wanting to travel in the fast lane will have to pay for the privilege. What makes the idea complex -- and odd -- is that websites will have to pay extra for high-speed delivery, but users won't have to pay extra for high-speed delivery.
From a technical perspective, it doesn't take much bandwidth to post a 100 megabyte video to a website. What does eat up a lot of bandwidth is when 10 million people download that video. If we are truly trying to rationalize the use of Internet resources, it makes sense to charge users, not website operators. Indeed, in the model currently proposed, website operators are effectively being penalized for posting desirable, free content on the web, which doesn't strike me a good public policy.
The other part of the discussion that confuses me is that website operators already pay extra for faster delivery. That's why a website owner expecting a large volume of traffic hooks up with an ISP with massive amounts of bandwidth, and generally pays extra for the privilege. Bigger pipes mean better throughput, and you pay extra for the privilege of having access to them. In addition, many website operators pay substantial amounts to so-called "edge networks" to gain distributed delivery of their content to improve delivery speeds.
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Further, every ISP agreement places a limit on the number of bytes transferred by a website operator per month, an excellent proxy for bandwidth consumption. Generate too much traffic and you'll need to pay your ISP more or risk getting cut off for the balance of the month. In short, there are already ways for a website owner to get faster delivery of their content, and there are already economic constraints in place to discourage a website operator from abusing Internet bandwidth resources. However you look at it, website owners are already paying the piper.
As far as I can tell, it seems the phone and cable companies are now saying "we want to be pipers too." If you want access to the Internet, you buy a data line that you can use to your heart's content for a flat monthly fee. ISP's do exactly the same thing; they just resell this bandwidth to their customers. So it's not as if the cable and phone companies aren't getting paid exactly the amount they ask. Rather, it seems they are regretting the revenue model they have chosen because it limits their revenue opportunity.
So here's my take on the Net neutrality debate: the people who own the pipes have now decided that they deserve to be pipers. Why? Because as everybody knows, you've got to pay the piper.
IMDB: It's (not) Only A Movie
The online newsletter PaidContent.org is reporting that the Internet Movie Database (IMDB ) is getting close to launching a video downloading service – think iTunes for movies. Once again, I find myself in awe of this trend-setting data publisher, which we awarded a Model of Excellence in 2004.
IMDB traces its history back to the earliest days of the Web, when it was founded as a non-profit volunteer effort to build an incredibly rich database of every movie ever made. User-contributed data may be a hot topic these days, but IMDB pioneered this way back in 1993. Wikis and blogs may be all the rage currently, but IMDB had elements of both as far back as 1995. Online community? Check out the passionate film fanatics posting away in IMDB forums. Ratings? They've had them for years already. You get the idea. This is innovation central.
IMDB was acquired by Amazon.com in 1998. There was a lot of tension surrounding this acquisition among the thousands of people who had contributed entries to the database and even made cash donations to support its operations.
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Amazon.com did nothing with IMDB for several years other than pumping resources into it to significantly expand the coverage and depth of the database. So little seemed to change for so long (even links between IMDB and Amazon.com, which sells movies weren’t introduced for quite some time), that I eventually concluded IMDB was nothing more than Jeff Bezos indulging his personal interests. Wrong. In a great case study for other companies, Amazon.com was taking the time to prove to disaffected volunteers and users that the site was getting significantly better under its ownership. Complaints melted away and site traffic remained strong.
Current state of play? Users viewing a movie profile on the site can now buy the movie from Amazon. Given IMDB's huge traffic, that alone is a big business victory for Amazon.com. Recently, IMDB rolled out a subscription-based "pro" version of its database, aimed at movie industry professionals. And now, it seems, an iTunes for video.
I like IMDB not just for its creativity, but for its business model as well. Most of the site remains free, drawing massive traffic that can be monetized through advertising. The "pro" product gives it a subscription revenue stream. And most interesting of all, the database is also being utilized as a retailing platform. Something for everyone, and everyone goes away satisfied and happy. How many business models can make that claim?
Central Market Position: Use It or Lose It
There is a fascinating article by Hershel Sarbin at Magazine Enterprise 360 on the surprising health of the allegedly dying B2B print business. Sarbin cites a rash of statistics that point to the continued health of print.
This certainly tracks with what I am hearing from our clients with magazine properties -- business is good, revenues are up, and a few are even reporting (quietly, for fear of jinxing this success they really don't understand) record years.
Almost the first day I entered this business, a brief 20 years ago, I heard predictions on the imminent death of print. I remember a meeting at Thomas Publishing in the early 80's where its composition vendor was demonstrating a prototype version of Thomas Register on something called a CD-ROM. To illustrate this miraculous new technology, the president of the vendor company brought with him a low power laser, which certainly had the rapt attention of the room as he demonstrated it, especially after it became apparent the laser beam was not at all low-powered. First takeaway from this meeting: print is dead. Second takeaway from this meeting: lasers are not toys.
I have been hearing about, and talking about, the imminent death of print ever since. But every time I look around, I see continued health and growth in print. So what gives?
My notion is what we are seeing is less a demonstration of the power of print than a demonstration of the underlying power of business publishers. B2B publishers exist to unite buyers and seller, and both buyers and sellers continue to want and need to be united. The format of choice to do this for many decades has been print. It's understood. It is comfortable. It has a track record of delivering results. That's why many publishers continue to push print and rely on it, and that's why many advertisers continue to buy print, and this situation has the potential to go on for a very long time.
The problem and risk is complacency. There is continuing power in the printing press, but the information paradigm has shifted permanently. Up to 90% of all pre-purchase B2B research occurs online, and that's why print-based publishers need to build out strong electronic alternatives to their print products. The real strength of most B2B publishers is their central market position, which you’ll hear more about in October at this year’s InfoCommerce 2006, and publishers need to make a genuine commitment to dominating their markets online as well as in print. Because if they don't provide the online counterparts to their successful print publications, some one else assuredly will.