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.
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.
App Store or App Storage?
In a recent article in Talking New Media, a writer with the pseudonym Alain Parkeat takes the Apple App Store to task for its incredibly bad design.
While I am not a frequent user of the App Store, every time I have to access it, I wince. For a company that hangs its hat on its relentless pursuit of perfection in design and user experience, everything about its App Store is slipshod and half-baked.
Really, you couldn’t do it much worse. The problems start right at the core of the whole App Store concept: in a rush to have the most apps, it’s necessarily assembled a collection of the worst apps. And here I am not just talking about the quality of the apps. Rather, I find I must tread warily with every search, because the App Store is riddled with frauds and imposters. Search on the trademarked name of a popular product, and you’ll invariably get not only that product, but lookalikes clearly designed to fool those who are not careful. They use deceptively similar names, logos and trade dress. They also are apparently allowed to use competitive product names as search keywords. Scariest of all, many of these lookalike apps are free – and thus likely to be nefarious ploys to gain access to your data or your passwords.
Searching the app store is also remarkably difficult. You think basic search functionality wouldn’t be too tough to implement, but with the App Store, you’d be wrong. Searching is about as literal as you can get, meaning that you better get your input exactly right, because the search engine isn’t going to help much at all.
This of course leads to categorization. Yup, the App Store is all over that, with 25 categories to classify a reported one million apps. I guess I’ll just click on the category “business” and start browsing. Clearly, with an average of 40,000 apps per category, this isn’t a very effective discovery mechanism.
But the App Store does feature apps, and since these apps are about the only thing you can easily discover in the App Store, they get enormous numbers of downloads. How does one become one of the few, the proud, the featured? Well, you need a lot of downloads first. Yes, if you want to be successful in the App Store, you better be successful before you get to the App Store. Otherwise, you better be very lucky.
Perhaps the most remarkable thing about the Apple App Store is that this is not some obligatory thing Apple threw together to keep customers happy. Indeed, it’s a major source of revenue, generating over $1 billion per month, with Apple helping itself to a nice share of the pie.
For most publishers, the harsh reality is that the App Store is, more accurately, the App Repository. Apple’s value is providing a central location for apps and easy downloads. As far as discovery goes, you’re on your own. If only there was an app for that!