Nicholas Thomas is the Director of Business Development at Docudesk Corporation and is passionate about user experience, design, and innovation. You can follow him on Twitter @nicholaswthomas and read his blog at NicholasWayneThomas.com.
Although some discount “The Pivot” as an overused buzzword, for a startup, pivoting can mean the difference between becoming the next success story and joining the deadpool. The principles behind the pivot apply to any industry. With lean resources, fickle users and quickly changing markets, startups have the most to gain from pivoting, and the most to lose from missed opportunities.
The reasons for changing course are often varied, and there are many factors to take into consideration when making the decision. Some companies have discovered that their products need to be significantly tweaked — or even scrapped all together. Others found that they had the right products, but have marketed to the wrong audience. For some, the only thing they had right was their team.
There may be some valid criticism in the over-usage of the term. Some of what can be identified as pivoting may just be the natural evolution of the company. The technique is not new though, and many established companies look significantly different now than in their early days.
Fortunately for today’s startups, pre-existing companies provide examples of successful adaptation.
When most people need recommendations for a good doctor or a good movie rental, they ask their friends. Jeremy Stoppelman started a company and asked millions.
Along with cofounder Russel Simmons, the company began in 2004 as an automated system for emailing recommendation requests to friends. Although the duo received $1 million in funding from PayPal co-founder Max Levchin, the idea fell flat with their audience.
However, users did viewed the system in a way they hadn’t expected: by writing reviews on local businesses just for fun. They decided to change course, capitalizing on the new “blue ocean strategy” of online reviews for local businesses. The original “Friendster Yellow Pages” now sees over 50 million users a month, with 17 million reviews online.
Lean startup wisdom says to start small and focus on niche markets. But when you have a great team in place though, focusing on the bigger picture can be worthwhile.
Founded in 2005, YouTube began as a video dating site called “Tune In Hook Up,” similar to HotOrNot.com. When the site failed to gain traction, the founders scrapped the idea, and instead focused on simply sharing videos online.
Acquired by Google for around $1.65 billion in stock, YouTube users now upload over 35 hours of video per minute.
Arising from the merger between two companies specializing in financial services (X) and cryptography (Confinity), PayPal originated as a way to exchange money via Palm Pilots. Peter Thiel is credited with seeing the potential to solve a much larger problem – an easy way to transfer money online.
After securing a relationship with eBay, PayPal was soon handling over 40% of eBay transactions before being acquired by the company in 2002 for $1.5 billion. PayPal now has over 100 million active accounts, and is again bullish on the mobile strategy, expecting to process over $3 billion in mobile payments in 2011.
A successful pivot can begin as a simple means to an end, or as a solution to a purely internal problem.
Woot.com began in 2004 as a way for Matt Ruttledge’s 12-year-old wholesale electronics distributor to clear out unsold inventory. The result was a new model for online shopping that combined bargain hunting with scarcity and urgency, all while maintaining a sense of humor that would become a company trademark.
After establishing the framework for daily deals sites and expanding their offering, Woot was acquired by Amazon in 2010 for $110 million.
A great example of a feature becoming its own product, Flickr’s roots lie in the development of an online role-playing game from gaming startup Ludicorp.
Recognizing they had developed a solution to a much larger problem, Caterina Fake and husband Stewart Butterfield decided to scrap development of the game, and focus instead on the larger potential of simplifying photo sharing on the web.
Ludicorp never actually published a game, and Flickr was purchased by Yahoo! in 2005 for an undisclosed sum.
Sometimes the idea can be completely right, but the target market completely wrong.
Founded in 2006, The Point began as a platform for mobilizing groups of people towards action for various causes. Groupon was initially just one subset of another site, (even launching at groupon.thepoint.com).
The group buying aspect struck a nerve with users much more so than the social and political concept the platform. As founder Andrew Mason put it, “The Point should have been the book, and Groupon should have been the company.”
Shopify is another example of a company born from solving an internal problem, but recognizing a bigger need.
In 2004, Tobias Lütke and Scott Lake needed an online shopping cart for their new snowboard business. When they found no suitable choices available, Lütke decided to write his own, and make his solution available to other small companies running into the same issue.
Shopify now hosts over 10,000 stores and is processing over $100 million in revenues.
Outside pressure can go a long way in sparking truly paradigm-shifting innovation.
In 2006, podcasting startup Odeo was quickly made irrelevant after the release of iTunes and other competition. Seeing the writing on the wall, Twitter began as a side project originating from “hackathons” to identify viable new opportunities.
Twitter now has over 200 million users, with secondary market trading placing the company’s valuation around $7 billion.
Allowing your users to influence the nature of your offering can be rewarding.
Launched in 2008 as a dating site for groups, Ignighter grew modestly in the U.S., adding 50,000 users in its first year. The idea of a dating site for groups rather than individuals caught fire in India though, where the site began adding as many users in one week as they had previously added in an entire year.
In 2010, cofounder Adam Sachs made the company’s pivot official, stating, “We are an Indian dating site.”
At nine months old with 1.25 million users for every employee, Instagram proves that the team can sometimes be more important than the product itself.
Founder Kevin Systrom started Burbn to learn programming outside of his marketing day job, aiming to blend elements of Foursquare and Mafia Wars in a mobile HTML5 app.
After receiving funding from Baseline Ventures and Andreesen Horowitz, Systrom added cofounder Mike Krieger to the project. The duo decided to take a mobile-first strategy by scrapping the original code for a native iPhone app. The resulting feature-rich app felt cluttered, inspiring the team to remove everything except the most important features and rename the app to reflect the new use case: Instagram.
Although no more divergent than Twitter was to its inception at Odeo, Turntable.fm’s origin is at least equally disparate, and for the time being at least, much more mysterious.
Born out of the mobile bar code-scanning startup Stickybits, the buzz and exclusivity surrounding Turntable.fm has quickly overshadowed its parent.
What makes this pivot intriguing is not just the divergent nature of the products, or of the established players Turntable.fm is challenging, but is their team’s reluctance to talk to the press about it.
Image courtesy of iStockphoto, Liquidphoto
More About: business, flickr, groupon, Ignighter, instagram, List, Lists, paypal, shopify, startups, turntable.fm, twitter, woot, yelp, youtube
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Dan Klamm is the Marketing & Communications Coordinator at Syracuse University Career Services, where he leads social media engagement. Connect with him on Twitter @DanKlamm and @CareerSU.
Is your college or university really doing a great job with social media? Lists like Student Advisor’s “Top 100 Social Media Colleges” and USA Today’s “20 colleges making good use of social media” point out the growing role social media plays in higher education.
We’re now at a point where almost all schools have a social presence, but many have yet to fully embrace the spirit of social media and tap into its potential. Social media presents a wealth of possibilities for engaging prospective students, current students, alumni, and other community members.
Here are some big-picture ideas for taking your school’s social media presence from good to great.
Social media management can’t occur in a vacuum. While social media roles are often housed in a central marketing or communications office, it’s imperative that social media managers have strong relationships with departments across campus and that they keep up constant communication.
When an alum announces on Twitter that he or she just landed an exciting new job, his alma mater’s social media manager might reach out with a quick, congratulatory tweet. But what happens after that? Does the social media manager alert the school’s career center that the alum has a new job and might be in a position to mentor current students (or even hire them)? Does the social media manager relay to the fundraising/development office that the newly successful alum might now have the financial resources to give money?
Imagine another scenario: A high school freshman asks a question on a university’s Facebook Page about an academic program, indicating that he or she can’t wait to apply for admission in three years. Does the school’s social media manager simply answer the question and offer a friendly, “We’d love to have you!” or does he or she alert the admissions office that a particularly enthusiastic high school freshman has made an inquiry via Facebook?
In these examples, many schools would just keep the dialogue on social media. Forward-thinking schools, however, have systems to mine the conversations already taking place and to proactively help departments across the institution to leverage the insights therein.
Having lots of Twitter followers and a high Klout score is great, but a more important measure of a school’s success with social media is whether its alumni and students can use the school’s social platforms to connect with each other.
Take LinkedIn, for instance. With the job market in such an unsteady state, professional networking is more important than ever. Students graduating from college should be able to easily connect with successful, established alumni. By that same token, alumni should equally be able to contact one another for job leads and business opportunities.
Despite the fact that some schools boast tens of thousands of alumni on LinkedIn, many may not know how to conduct advanced searches, join groups or ask for introductions. This makes networking difficult.
The answer to this problem? Training. Progressive schools offer workshops and webinars not only for their current students, but for alumni decades out of college. Sessions cover everything from searching for alumni to the etiquette of reaching out and writing an introductory message. Schools that offer education and training programs have strong, thriving networks where students and alumni can turn to each other for advice and connections.
Students are the lifeblood of academic institutions, so they should also be an integral part of any school’s social media strategy. Students have the ability to connect with their fellow students, compel prospective students to enroll and tug at the heartstrings of alumni who wish to relive their glory days on campus. They know the school personally, and they’re familiar with student activities and traditions, giving them an authenticity that resonates especially well in social media.
There are some great examples already out there. At Stanford, a team of digital media interns curates content for the school’s Facebook and Twitter accounts. Cornell features a group of student bloggers delivering an “uncut, uncensored glimpse at life on the Hill.” At Villanova, students star in YouTube videos promoting use of their school’s career center.
Think of other ideas like having students live-tweeting campus events, doing online Q&A sessions with prospective students, or interviewing successful alumni to feature on YouTube. Lots of schools already involve students, so there are plenty of strong examples to learn from. The key is for school administrators to loosen the reigns just a bit, allowing for students to express their own school spirit and get creative.
For the “old school” institutions out there, this must seem like an absurd suggestion. University presidents are too busy to eat meals, let alone tweet! But the truth is that dozens of presidents already have Twitter accounts and many of them are already tweeting effectively.
At UW-Madison, outgoing Chancellor Biddy Martin tweets to more than 5,000 followers about campus events and meetings, frequently responding to questions and comments from her community. Ohio State President E. Gordon Gee tweets to more than 18,000 followers about faculty and student accomplishments, university news and his perspective on happenings in the world.
There is a lot of room for growth here. University presidents might even start hosting “Town Hall”-style meetings (as Barack Obama recently did) to answer questions from students, alumni, faculty and parents.
When a president tweets (or blogs), he or she sets a tone of transparency and signals a genuine interest in communicating with the school’s community. Whether the president tweets about what was for breakfast, shares interesting tidbits from daily meetings or raises questions for the community to answer, just the fact that those comments are online makes the college seem friendlier and more open. Additionally, it sends the message that the school values innovation and modern means of communication.
These are just a few ideas for strengthening your school’s social media presence. As we look to the future of social media for colleges, what do you think is the next step? Share your thoughts in the comments below.
Image courtesy of iStockphoto, gizmotoy
More About: college, education, social media, twitter, university
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Kelley Fernbacher is the director of non-profit outreach at BroadCause, a social good platform that unites people, brands and non-profit organizations to activate passionate communities around the causes that are most important to them. Follow BroadCause on Twitter and Facebook, or support BroadCause non-profits through the BroadCause website.
Let’s say you want to give back, but your pockets aren’t overflowing with cash. What can you do?
There are many meaningful ways to give back beyond writing checks. Whether you’re passionate about a global issue or a local community cause, the web makes it easier than ever to show your support.
Here are seven ways you can easily devote some of your hours of web surfing to social good.
You have a valuable skill set, so share it! Smaller non-profit organizations often have limited resources. Access to graphic designers, writers, event planners and many other professionals can be hard to budget. Online volunteering services such as Smart Volunteer and Volunteer Match pair talented professionals with non-profits seeking a wide range of skills and services.
You don’t need to leave your computer to sign up for an online mentoring program. You can devote 30 minutes per week on Infinite Family to mentor a South African teen.
If you’re a math wiz, tutor children on Reasoning Mind. You can also try ICouldBe, where just 20 minutes of tutoring a week helps low-income students stay in school and make better career choices.
If you’re an online shopping addict, you can donate a portion of each of your sprees to charity. Partner merchants of Buy4 and We-Care agree to donate a portion of each purchase to a charity of the shopper’s choosing. The sites have over 1,600 partners so you’re sure to find what you want. We-Care also lets you add your own cause, meaning your next online shopping trip can support your local schools or favorite charity.
If you’re in the giving spirit but don’t want to “just” write a check, you can pick out an affordable gift for a community in need. Plan USA allows shoppers to purchase “Gifts for Hope” starting at $10. Lower-priced gifts range from baby blankets and mango trees to “three baby chicks” or an emergency water supply.
Oxfam America Unwrapped has a similar model, allowing shoppers to choose a gift based on a specific occasion or recipient. You can also try Donors Choose which lets you purchase much-needed school supplies for classrooms across the country.
Your savvy, sale-finding skills can help others! Group deal site Common Kindness saves you money on groceries while contributing to a charity of your choice. Philanthroper creates daily “deals” for small non-profits. It sends an email every day sharing a small organization’s story. Subscribers who relate to the tale can then submit one dollar of support.
Even the most basic web interactions can be turned into vehicles for good. Charitable search engine Good Search automatically donates to the charity of your choice each time you run an online search. You can click-to-donate with Care2, which generates donations whenever you click a link. Sign up for a daily email that reminds you to go back and click every day.
Finally, you can give your mind a rest and play a game. Double Impact turns gaming into charitable giving. Players perform small, sustainability-focused tasks to earn points that translate into dollars donated to a range of different charities. On the other hand, Games for Change‘s games educate players about world issues and inspire more awareness and involvement. If you like Internet quiz games, try Free Rice, which donates ten grains of rice to the United Nations World Food Program for each correct answer generated.
Image courtesy of Flickr, Clover_1
More About: charity, online games, social good, volunteer
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Gabe Zichermann is the author of Gamification by Design and chair of the upcoming Gamification Summit NYC, where top leaders in the field – such as those profiled here – get together to share insight, key metrics and best practices. Mashable readers are invited to register with special savings at GSummit.com using code MASH10.
Gamification is the use of game thinking and game mechanics to engage audiences and solve problems. In other words, it means taking the best lessons from games like FarmVille, World of Warcraft and Angry Birds, and using them in business. Whether targeted at customers or employees, across industries as diverse as technology, health care, education, consumer products, entertainment and travel, gamification’s impact can already be felt.
While some have criticized the concept of gamification as shallow or demeaning, the initial findings from gamification specialists are nothing short of astonishing. Regardless of your business model, the following seven gamified innovations should inspire you to strategize via game analysis.
The first incarnation of the location-based networking field was littered with carnage, leading many to write off the entire concept. But Foursquare’s founders, veterans of the now defunct Dodgeball, succeeded with an ace in the hole: game mechanics. Exposed to the concept while working at Area/Code (Zynga’s recently acquired New York City-based game design shop), Dennis and Naveen concluded that mobile social networking would work if you were to change the dynamic from multiplayer to single player.
Instead of depending on the action of the crowd to provide intrinsic reinforcement (e.g. “Hey, you’re around the corner. Let’s grab a beer!”), Foursquare overcame the empty bar problem by becoming a single-player game. The user competes for badges and mayorships whether or not anyone is there to meet him. In the process, Foursquare proved that location-based networking wasn’t doomed to fail, that simple game mechanics can affect behavior, and that you can engage 10 million customers — all while raising $50 million.
When you listen to NextJump CEO Charlie Kim describe his zeal for physical fitness, you immediately understand the energy that has propelled this interactive marketing platform into one of the nation’s fastest growing businesses. But keeping fit isn’t just Kim’s personal goal — he told me it’s also a practice he believes his employees should value as a tool for improving their lives, reducing company insurance costs and preventing employee absenteeism. To achieve those goals, NextJump installed gyms in its offices, and built a custom application that enabled employees to check in to each workout. Ultimately, they rewarded the top performers with a cash prize. After implementation, around 12% of the company’s staff began a regular workout regimen.
But Kim wasn’t satisfied. By leveraging the power of gamification, he retooled the fitness “game” to become a team sport. Now NextJump employees could form regionally based teams, check in to workouts and see their team performance on a leaderboard. Leveraging the game themes of tribalism and competition had an astonishing effect on behavior. Today, 70% of NextJump employees exercise regularly — enough to save the company millions in work attendance and insurance costs over the medium term — all the while making the workplace healthier and happier.
In many countries, speed cameras snare thousands of drivers each year — a quick shutter flash earns a miserable ticket in the mailbox. In some countries, particularly in Scandinavia, ticket amounts correspond with the driver’s salary, rather than his speed. But Kevin Richardson, game designer at MTV’s San Francisco office, re-imagined the experience using game thinking.
His innovative Speed Camera Lottery idea rewards those drivers who obey the posted limit by entering them into a lottery. The compliant drivers then split the proceeds generated from speeders. Richardson used gamification concepts to turn an negative reinforcement system into a positive, incremental experience.
When tested at a checkpoint in Stockholm, average driver speed was reduced by 20%. If the plan were scaled across the U.S., the results could mean thousands fewer injuries, millions of dollars worth of reduced costs and substantial environmental benefits.
Psych is a popular program on the USA Network, but these days, creating value for TV advertisers means connecting to the web and social media in creative ways. Enter Club Psych, the online brand platform for the show, and among the first major media platforms to get gamified.
The brainchild of NBC/Universal executive Jesse Redniss, Club Psych implemented gamified incentives to raise page views by over 130% and return visits by 40%. The resulting rise in engagement has generated substantial revenue for the company, bringing registered user counts from 400,000 to nearly 3 million since the launch of the gamified version. The media conglomerate has since embraced the strategy across properties, bringing gamification to ratings leaders like Top Chef and the The Real Housewives.
Other content publishers, like Playboy, have seen similar results. Their Miss Social Facebook app has achieved an 85% re-engagement rate and 60% monthly revenue growth with gamification.
Getting product feedback is a costly and challenging effort. Therefore, most marketers have come to loathe ineffective surveys and expensive focus groups. Enter Crowdtap, the hot New York City startup launched earlier this year that reached $1 million in revenue and 100,000 users in just over 90 days. The company offers consumers gamified rewards to complete research tasks and to share brand advocacy with others — something mere market research simply cannot do.
Through the use of gamified, virtual rewards, the company has been able to raise average user participation by 2.5 times, thus reducing research costs by 80% or more for key clients. By targeting consumer rewards along a motivational (not demographic) axis, CEO Brandon Evans reports that competition-oriented users are four times more likely to create quality comments and 12 times more likely to refer others to the platform. Instead of competing against the system, they challenge themselves and peers to excel — an extraordinary achievement by any measure.
Modern life is wasteful, and easy fixes are rare. By tapping into people’s desire for reward and competition through gamified experiences, governments, utilities and entrepreneurial powerhouses are rewriting the rules of sustainability — and making the world a better place.
In a Medford, MA pilot program, households competed in an energy smackdown in which the winning family managed to lower its carbon footprint by 63%. In a program called Putnam RISE, Indiana families are making thousands of pledges to reduce power usage through a competition. The schools whose families conserve the most energy receive a cash prize. And across the country, incentives experts at Recyclebank are using the power of gamification to radically improve home environmental compliance. So far, they’ve utilized game mechanics such as points, challenges and rewards to drive breakthroughs. For example, the project has seen a 16% increase in recycling in Philadelphia, where the recycling rate has broken 20% for the first time in history.
As former globetrotting business executive turned elementary school teacher, Ananth Pai has seen it all. But when he inherited his class in White Bear Lake, MN, Pai realized there had to be a better, more engaging way to teach. So he grouped students by learning style, and retooled the curriculum to make use of off-the-shelf games (both edutainment and entertainment) to teach reading, math and other subjects. Students play on Nintendo DS and PCs, both single and multiplayer, for example. Their overall point scores are tabulated and shared using leaderboards.
In the space of 18 weeks, Mr. Pai’s class went from below third grade average reading and math levels to mid-fourth grade. The classroom success is supported by video interviews with his kids, who say “Learning with Mr. Pai is fun and social.”
In addition to these seven great tips, dozens more success stories pour in each week, underscoring the tremendous investment of time and money into gamification. Gartner Group estimates that by 2015, 70% of the Forbes Global 2000 will be using gamified apps, and M2 Research forecasts that U.S. companies alone will spend $1.6 billion on gamification products and services by that same year.
Gamification spans the gamut — from the hundreds of startups that launch with game mechanics incorporated into their products, to the big brands that make gamification a hallmark strategy. Regardless, the message is the same: the future will be more connected, more social and more fun than ever before.
More About: competition, foursquare, game mechanics, games, gamification, incentives, social media
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If something is too good to be true, then it probably is. But once in a generation, an idea (or in this case, a business model) comes along that is so disruptive that the old the adage is proven wrong. That disruptive business model is Groupon and the daily deal industry. There’s a lot of noise coming from skeptics and naysayers who look at the legitimacy, longevity and viability of the model. However, those critics are also overlooking the fundamentals of why daily deals are here to stay. On a high level, daily deals are an ecommerce business with relatively low overhead, no inventory, an enormous amount of consumer appeal and rock solid concepts. When the daily deal model is properly executed, it serves everyone: Businesses, consumers and, obviously, the daily deal sites themselves. While it’s the nature of haters to hate on a business model that creates so much wealth for two young entrepreneurs in two very short years, the reality is that we should be congratulating Groupon’s creators for helping shape a paradigm shift in ecommerce. One of the most popular arguments against daily deals is that the economy is rebounding and the need (or interest) in local ecommerce deals will wane. However, the success and sustainability of daily deals is in no way contingent upon the economy. Buyers have wanted deals since the dawn of trade, and finding ways to save money is hardly a new concept. eMarketer predicts that by 2013, 96.8 million adults will redeem an online coupon. Will the demand for better coupons evolve? Will merchants demand a better return on their daily deal investment? Yes. But the fundamental desire to save money and find a good deal is not going anywhere. One might argue that the majority of online businesses are not at full capacity — meaning, there are virtually no businesses that couldn’t use more customers. That is fundamentally what daily deal sites offer any business: new customers. Once the economy does fully “rebound,” it is going to look a little different. Thanks to the recession, businesses have learned to trim the fat, create efficiencies and become more nimble and resourceful. Local businesses may not have the same customer base and thrive as they once did in the past. The recession has taught everyone to create efficiencies and save money. That mentality isn’t going anywhere either. There are of course some Groupon horror stories. No one wants to see local business falter and it’s unfortunate that many businesses haven’t been able to capitalize on their daily deal partnership and reap some nice, long-term benefits. Every business has the capacity to run a successful daily deal, but business owners must be smart about what kind of campaign they’re executing. Regardless of the medium, a poorly run advertising campaign is a poorly run advertising campaign. Daily deals are one of the most disruptive local marketing tools since online search. The goal of daily deal providers is to drive customer acquisition. As a business owner, you need to be strategic about the type of deal you run and carefully craft deals that either drive new users or create opportunities to upsell. For example, search engine marketing (SEM) is by no means a simple, straightforward model for a local business, but is generally heralded as an effective way to get new customers online. Groupon and other daily deal sites are essentially doing the same thing while also guaranteeing some revenue. Let’s do some math comparing Groupon to Google in terms of customer acquisition: Not only did that customer just walk in the door, but the business is getting paid $12 for them to do so. Now does it make sense that Google offered $6 billion for Groupon’s business? Consumers feel good when they save money. As the daily deal industry matures, both merchants and daily deal sites will need to refine their strategy. Two things are certain: 1. Businesses will always have excess capacity/room for growth, and 2. Small/local businesses will always need marketing channels. Just a short year ago, a handful of players controlled 90% of the market in the daily deals space. While it’s estimated some 200 daily deal sites exist, a handful of players still control that same share of the space. When compared to other markets, daily deals are no more saturated than search engines, and certainly not as saturated as publishing, broadcast television, radio or direct mail. On one level, daily deal channels are essentially ad networks for small and local businesses, giving them the opportunity to directly drive revenue, grow exposure and expand a highly targeted customer base. The addition of more daily deal sites to the market is resulting in deals that are not as appealing to as wide a user base, but this is actually a positive thing for consumers and merchants. The more direct an offering and the more targeted the customer, the more a customer who buys a deal will be a repeat customer. The market may be saturated, but then isn’t that a sure sign of market buoyancy? Image courtesy of Flickr, Don Hankins More About: business, daily deals, deal, Google, group buying, groupon, SEM For more Business & Marketing coverage:
This post reflects the opinions of the author and not necessarily those of Mashable as a publication.
John Amato is the CEO of MarketSharing, a premium business-to-business deals provider for exceptional business products and services. Follow @MarketSharing on Twitter for more information and the latest deals for businesses.
1. Consumers Will Always Want a Deal
2. Smart Businesses Will Reap Rewards, Despite Losing Money on Deals
3. The Market Is Still Maturing
If something is too good to be true, then it probably is. But once in a generation, an idea (or in this case, a business model) comes along that is so disruptive that the old the adage is proven wrong. That disruptive business model is Groupon and the daily deal industry. There’s a lot of noise coming from skeptics and naysayers who look at the legitimacy, longevity and viability of the model. However, those critics are also overlooking the fundamentals of why daily deals are here to stay. On a high level, daily deals are an ecommerce business with relatively low overhead, no inventory, an enormous amount of consumer appeal and rock solid concepts. When the daily deal model is properly executed, it serves everyone: Businesses, consumers and, obviously, the daily deal sites themselves. While it’s the nature of haters to hate on a business model that creates so much wealth for two young entrepreneurs in two very short years, the reality is that we should be congratulating Groupon’s creators for helping shape a paradigm shift in ecommerce. One of the most popular arguments against daily deals is that the economy is rebounding and the need (or interest) in local ecommerce deals will wane. However, the success and sustainability of daily deals is in no way contingent upon the economy. Buyers have wanted deals since the dawn of trade, and finding ways to save money is hardly a new concept. eMarketer predicts that by 2013, 96.8 million adults will redeem an online coupon. Will the demand for better coupons evolve? Will merchants demand a better return on their daily deal investment? Yes. But the fundamental desire to save money and find a good deal is not going anywhere. One might argue that the majority of online businesses are not at full capacity — meaning, there are virtually no businesses that couldn’t use more customers. That is fundamentally what daily deal sites offer any business: new customers. Once the economy does fully “rebound,” it is going to look a little different. Thanks to the recession, businesses have learned to trim the fat, create efficiencies and become more nimble and resourceful. Local businesses may not have the same customer base and thrive as they once did in the past. The recession has taught everyone to create efficiencies and save money. That mentality isn’t going anywhere either. There are of course some Groupon horror stories. No one wants to see local business falter and it’s unfortunate that many businesses haven’t been able to capitalize on their daily deal partnership and reap some nice, long-term benefits. Every business has the capacity to run a successful daily deal, but business owners must be smart about what kind of campaign they’re executing. Regardless of the medium, a poorly run advertising campaign is a poorly run advertising campaign. Daily deals are one of the most disruptive local marketing tools since online search. The goal of daily deal providers is to drive customer acquisition. As a business owner, you need to be strategic about the type of deal you run and carefully craft deals that either drive new users or create opportunities to upsell. For example, search engine marketing (SEM) is by no means a simple, straightforward model for a local business, but is generally heralded as an effective way to get new customers online. Groupon and other daily deal sites are essentially doing the same thing while also guaranteeing some revenue. Let’s do some math comparing Groupon to Google in terms of customer acquisition: Not only did that customer just walk in the door, but the business is getting paid $12 for them to do so. Now does it make sense that Google offered $6 billion for Groupon’s business? Consumers feel good when they save money. As the daily deal industry matures, both merchants and daily deal sites will need to refine their strategy. Two things are certain: 1. Businesses will always have excess capacity/room for growth, and 2. Small/local businesses will always need marketing channels. Just a short year ago, a handful of players controlled 90% of the market in the daily deals space. While it’s estimated some 200 daily deal sites exist, a handful of players still control that same share of the space. When compared to other markets, daily deals are no more saturated than search engines, and certainly not as saturated as publishing, broadcast television, radio or direct mail. On one level, daily deal channels are essentially ad networks for small and local businesses, giving them the opportunity to directly drive revenue, grow exposure and expand a highly targeted customer base. The addition of more daily deal sites to the market is resulting in deals that are not as appealing to as wide a user base, but this is actually a positive thing for consumers and merchants. The more direct an offering and the more targeted the customer, the more a customer who buys a deal will be a repeat customer. The market may be saturated, but then isn’t that a sure sign of market buoyancy? Image courtesy of Flickr, Don Hankins More About: business, daily deals, deal, Google, group buying, groupon, SEM For more Business & Marketing coverage:
This post reflects the opinions of the author and not necessarily those of Mashable as a publication.John Amato is the CEO of MarketSharing, a premium business-to-business deals provider for exceptional business products and services. Follow @MarketSharing on Twitter for more information and the latest deals for businesses.
1. Consumers Will Always Want a Deal
2. Smart Businesses Will Reap Rewards, Despite Losing Money on Deals
3. The Market Is Still Maturing
If something is too good to be true, then it probably is. But once in a generation, an idea (or in this case, a business model) comes along that is so disruptive that the old the adage is proven wrong. That disruptive business model is Groupon and the daily deal industry. There’s a lot of noise coming from skeptics and naysayers who look at the legitimacy, longevity and viability of the model. However, those critics are also overlooking the fundamentals of why daily deals are here to stay. On a high level, daily deals are an ecommerce business with relatively low overhead, no inventory, an enormous amount of consumer appeal and rock solid concepts. When the daily deal model is properly executed, it serves everyone: Businesses, consumers and, obviously, the daily deal sites themselves. While it’s the nature of haters to hate on a business model that creates so much wealth for two young entrepreneurs in two very short years, the reality is that we should be congratulating Groupon’s creators for helping shape a paradigm shift in ecommerce. One of the most popular arguments against daily deals is that the economy is rebounding and the need (or interest) in local ecommerce deals will wane. However, the success and sustainability of daily deals is in no way contingent upon the economy. Buyers have wanted deals since the dawn of trade, and finding ways to save money is hardly a new concept. eMarketer predicts that by 2013, 96.8 million adults will redeem an online coupon. Will the demand for better coupons evolve? Will merchants demand a better return on their daily deal investment? Yes. But the fundamental desire to save money and find a good deal is not going anywhere. One might argue that the majority of online businesses are not at full capacity — meaning, there are virtually no businesses that couldn’t use more customers. That is fundamentally what daily deal sites offer any business: new customers. Once the economy does fully “rebound,” it is going to look a little different. Thanks to the recession, businesses have learned to trim the fat, create efficiencies and become more nimble and resourceful. Local businesses may not have the same customer base and thrive as they once did in the past. The recession has taught everyone to create efficiencies and save money. That mentality isn’t going anywhere either. There are of course some Groupon horror stories. No one wants to see local business falter and it’s unfortunate that many businesses haven’t been able to capitalize on their daily deal partnership and reap some nice, long-term benefits. Every business has the capacity to run a successful daily deal, but business owners must be smart about what kind of campaign they’re executing. Regardless of the medium, a poorly run advertising campaign is a poorly run advertising campaign. Daily deals are one of the most disruptive local marketing tools since online search. The goal of daily deal providers is to drive customer acquisition. As a business owner, you need to be strategic about the type of deal you run and carefully craft deals that either drive new users or create opportunities to upsell. For example, search engine marketing (SEM) is by no means a simple, straightforward model for a local business, but is generally heralded as an effective way to get new customers online. Groupon and other daily deal sites are essentially doing the same thing while also guaranteeing some revenue. Let’s do some math comparing Groupon to Google in terms of customer acquisition: Not only did that customer just walk in the door, but the business is getting paid $12 for them to do so. Now does it make sense that Google offered $6 billion for Groupon’s business? Consumers feel good when they save money. As the daily deal industry matures, both merchants and daily deal sites will need to refine their strategy. Two things are certain: 1. Businesses will always have excess capacity/room for growth, and 2. Small/local businesses will always need marketing channels. Just a short year ago, a handful of players controlled 90% of the market in the daily deals space. While it’s estimated some 200 daily deal sites exist, a handful of players still control that same share of the space. When compared to other markets, daily deals are no more saturated than search engines, and certainly not as saturated as publishing, broadcast television, radio or direct mail. On one level, daily deal channels are essentially ad networks for small and local businesses, giving them the opportunity to directly drive revenue, grow exposure and expand a highly targeted customer base. The addition of more daily deal sites to the market is resulting in deals that are not as appealing to as wide a user base, but this is actually a positive thing for consumers and merchants. The more direct an offering and the more targeted the customer, the more a customer who buys a deal will be a repeat customer. The market may be saturated, but then isn’t that a sure sign of market buoyancy? Image courtesy of Flickr, Don Hankins More About: business, daily deals, deal, Google, group buying, groupon, SEM For more Business & Marketing coverage:
This post reflects the opinions of the author and not necessarily those of Mashable as a publication.John Amato is the CEO of MarketSharing, a premium business-to-business deals provider for exceptional business products and services. Follow @MarketSharing on Twitter for more information and the latest deals for businesses.
1. Consumers Will Always Want a Deal
2. Smart Businesses Will Reap Rewards, Despite Losing Money on Deals
3. The Market Is Still Maturing
Bill Clark is the CEO of Microventures, a securities broker/dealer that uses crowdfunding to allow investors to invest between $1,000 and $10,000 in startups online. You can follow him on Twitter @austinbillc.
Whether you are an entrepreneur or an angel investor, the topic of convertible note vs. equity impacts you. For the most part, startups favor convertible notes and angels prefer equity, but which one is the right choice for your startup?
Here, we review the benefits of each.
Convertible debt was most commonly used as a bridge loan between two rounds of financing. For example, if you raised $1,000,000 in series A funding and you were going to raise $5,000,000 in a series B round, you might use a bridge loan if you needed $250,000 until the funding was completed. However, convertible debt has recently become a popular seed round financing instrument.
Here is a basic overview of how convertible notes work:
In this scenario, let’s assume the shares were priced at $1.00. Since there is a 20% discount, the investor can use that $200,000 investment to purchase shares at the discount rate of $.80 each, instead of the $1.00 price that other participants in the current funding round will have to pay. That gives the initial investor 250,000 shares for the price of 200,000, which is a 25% return — not bad.
Caps can also be added to convertible debt. A cap sets a limit for how much the startup can raise before your shares stop getting diluted. It doesn’t value the convertible note, but it sets an upper limit. So in the example above, if the pre-money cap was $5,000,000, you would still get a discount of 20% up to that amount. If the startup raised at a valuation over $5,000,000, then the discount would increase to offset the additional dilution that was occurring. When you add a cap, the math gets a little trickier, as it can change with different funding scenarios.
While a convertible note might be a little confusing to calculate, equity is a breeze. The startup is assigned a pre-money valuation and a share price is determined. When you invest, you know exactly what the terms are and how many shares you will own in that round.
Here’s how it works:
If equity is so much easier to understand, why are convertible notes becoming more common in the startup community? Here are four reasons why:
1. Valuation: Determining the valuation of a startup is hard, especially if the startup is pre-revenue and only in the idea phase. How do you put a value on the potential of the team/idea? It is easier for a startup to put off that question until they have some traction and social proof. Convertible notes are attractive for a startup because it delays this issue. While adding a cap essentially prices the round, it does leave a range of options, so it is more attractive to the startup.
2. Cost: Convertible note term sheets are less expensive than term sheets for equity, although with new standard term sheets that cost difference is starting to diminish. Sometimes it doesn’t make sense to pay the additional legal costs for closing the equity round if the funding increase is less than $250,000.
3. Speed: The equity valuation conversation can take weeks of negotiating before terms are agreed upon. With debt, the terms are simple, easier to negotiate, and you can close on them pretty quickly.
4. Control: When a startup raises debt, the founders retain the majority of the voting stock in the company. That means when it comes time to make a decision that requires a vote, you will be in a better position to execute your plan. You might get a broad seed request with a larger debt investment, but typically in a seed stage offering, you won’t have to worry about that.
Every situation calls for a different type of financing structure. It is important that each benefit is weighed to see what is right for the startup and for the investor. As a startup, you want to give your early investors good terms because they are helping you accomplish your goals. As an investor, you want to make it as easy as can be for the startup because they need to be focusing on building the business and not revising terms for an offering.
Image courtesy of Flickr, Marshall Astor – Food Pornographer
More About: business, convertible debt, equity, startup
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Shane Snow is co-founder of Contently.com, an “agile publishing” platform for brands-turned-publishers and freelance journalists.
Most people quit blogging — and most companies do too, for that matter.
Like healthy diet, frequent exercise, proper posture or any other New Year’s resolution, blogging results take time. A 2008 Technorati survey put the abandonment rate of blogs at about 95%.
Part of the reason for low blog success rate is that most of us have a hard time predicting what kind of return blogging will achieve. “If I blog every day for a month, will I get more leads?” Probably. But it may take six months, not one.
That doesn’t mean it’s not worth the fight.
Before the Internet put publishing and distribution tools in everyone’s hands for free, companies that wanted brand exposure paid for time and/or placement on a third party media property (radio ads, TV commercials, banners). Many still do, but a general shift is occurring online – away from outbound marketing and paid media, toward creating one’s own branded content and spreading that media across the social web.
According to the Content Marketing Institute, 68% of CMOs say they are shifting budget from traditional advertising to this type of content marketing.
But measuring the return on investment (ROI) on content is difficult, especially if you’re not judging success by ad revenue.
Nine out of ten organizations market with content, according to a recent B2B content marketing survey. Companies like Mint, American Express and Hubspot are now competing with “traditional” media companies for eyeballs with their own content. They’re seeing results -– not necessarily in the form of advertising, but rather, through leads, subscribers and brand awareness.
A recent study by Hubspot indicates that Hubspot customers who practice inbound marketing (of which content is a core element) increase leads an average of 4.2 times within a few months. Other studies have shown similar results, that consistent content output increases conversions.
Content costs money, and measuring the results of your content effort is important. But an effective content strategy is like planting a garden: it takes consistent work that eventually pays off in large quantities. However, failure to water or plow that garden will result in weeds, in other words, a blog post every three months whose only comments are spam.
So how do you convince your boss, your partners or even yourself that content is a good investment? Here are three steps to effectively measure your content strategy:
Traditionally media companies use readership and ad revenue as the yardstick for content’s success. In content marketing, however, the goal is typically to achieve some sort of conversion or to build “brand awareness,” a rather ambiguous metric.
A conversion can consist of a mailing list or an RSS subscriber, a user signup, a phone call, a sale or any number of user interactions. The first step to measuring ROI on your content strategy is to set a goal.
If your content goal is to increase user signups, you first need to know your baseline: how many signups are you getting now, and from what sources? Once you start your content efforts, you want to be able to measure the results against that baseline.
Unless you’re already starting with a large audience (huge mailing list, captive user base, etc), it’s going to take a while to build momentum, and even longer to start seeing conversions. However, several proxies can help you chart your progress.
These proxies present immediate signs of encouragement, more so than, say, search engine ranking, which can take a while to manifest. Here’s a quick list of proxies for measuring a blog’s ROI:
These proxies will monitor how well your content is resonating, how you’re building trust in your brand. That trust will eventually turn into loyalty, advocacy and continued conversion.
It’s important to note that absolute measurements are rarely useful. What you’re looking for is a trend line. The number of retweets relative to previous content on your site or peer sites is a more useful yardstick than the total number of retweets.
Though it may not seem like much, an average of five tweets on a post today versus an average of one tweet three weeks ago is a great sign of progress.
Also, because some pieces of content will be outliers (whether spikes or duds), it’s important to pay attention to aggregate trend data rather than isolated post data. For example, the average number of retweets in June compared to April is a better measure of progress than the number of retweets on today’s blog post versus yesterday’s.
From a practical standpoint, measuring conversions can be as simple as installing Google Analytics, or keeping a spreadsheet of leads or even tick marks on a whiteboard.
While keeping track of the raw conversion numbers (How many leads are we getting this month versus five months ago when we weren’t blogging?) is important, it’s also crucial to measure secondary indicators. If you’re measuring leads, these might include the following:
“One way we try to quantify ROI is to track content users very closely,” says Sam Slaughter, a producer at Comcast.net. “That way we can tell if they went from consuming content to buying a product, or to bookmarking the page, or to digging deeper into the publisher site or any number of actions that the publisher might be able to monetize. From there, we can often come up with an actual dollar value from that piece of content.”
Content strategy for most businesses isn’t about instant advertising metrics anymore; therefore, clear ROI data can take a while to manifest. Once it does, however, returns will generally increase as you continue to consistently publish.
“When we talk about ROI for content we often use terms like ‘adoption,’ ‘time on site,’ ‘page views per unique’ and things like that,” says Slaughter. “The idea [is] that while you might not be monetizing the content on your site directly, you are using that content to attract new and better users who you can monetize down the road.”
In the end, planning, tracking and consistency will help you succeed. As Problogger founder Darren Rowse recently tweeted, “Building blogs is like building muscles.” Great content properties, like muscles, take patience.
Image courtesy of iStockphoto, pearleye
More About: advertising, blogging, business, content, MARKETING, online marketing, ROI, social media, twitter, web
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David Staas is senior vice president of marketing at JiWire, overseeing the marketing and product management of JiWire’s location-based media channel that reaches the on-the-go mobile audience. He has more than 13 years of marketing and product management experience in the mobile and advertising industries.
Location isn’t new to advertising. Take the billboard on the highway — there because that brand knows its target audience will see it. Merchants have been placing signs in places where their target audience will see them since the beginning of commerce. Today more than $130 billion is spent in the U.S. each year on locally targeted advertising. Most of that spending isn’t digital, but rather, more traditional formats like billboards and newspapers — places where marketers are accustomed to advertising. So while location advertising may not be new, marketers can now digitally localize their ads. The question is, how do brands win in this new world of location media?
One of the most exciting aspects of location is the explosion of new content and services. There are now tens of thousands of location-based mobile apps, and even more that have made location a key feature. Many of these apps provide great platforms to test location ideas. However, they don’t provide the audience size to roll out an impactful campaign or concept on a regional or national scale.
The key is finding balance. Advertisers must first develop campaign concepts that allow flexibility. Ask these questions: Can I scale this concept easily to all of my locations? Can I incorporate locations other than my own? Can I expand my target zone? Am I able to go beyond the immediate vicinity to engage consumers one mile, five miles, even ten miles away? If you can meet these qualifications, and reach an audience in the tens of millions, your location scale is justified.
Advertisers are used to evolving. They’ve “digitized” their brands using the Internet, “socialized” their brands with social media and now are learning how to “locationize” with the mass market adoption of location media. I use the term “locationize” because success requires more than just using location as a targeting attribute. Sure, you can deliver a standard, national ad to a variety of targeted zip codes or DMAs, but you’ll be missing out on the full opportunity. Add location relevancy to the creative and to the messaging itself.
There are three ways brands have experimented with this concept:
Not surprisingly, most consumers don’t spend all of their time in the immediate vicinity of your brand. Sometimes they may be in your store, and other times within the neighborhood or even miles away. Each distance presents an opportunity.
In recent research of more than 5,000 mobile consumers, 31% said that they most typically research something on their mobile device before purchasing it physically in the store. Mobile and location drive real world revenues. In a similar study done by my company, consumers shared how far they were willing to travel to get a good deal. When posed with discounts off of a $100 item, 55% said they would travel up to 15 minutes for a 10% discount. However, 45% said they would travel 30 minutes for a 25% discount, and another 40% were willing to travel an hour for a 50% discount.
This fascinating demand curve shows how consumers react via a distance-to-discount ratio. In practical terms, this means marketers can engage customers miles away with great results. By considering proximity, marketers can develop strategies beyond the checkin to generate new customers and to engage existing customers well beyond the neighborhood.
Every new form of media creates its own unique metrics, like the click-through rate created by digital advertising. Location gives us entirely new ways to measure advertising and thereby gain new insights around a brand’s business. Consider evolving the click-through rate. If we apply location and proximity, we can begin to look at click-through rates based on proximity to a brand’s location. How many people check in when they are in a store? What is the engagement rate of a campaign when people are within a mile of a store? Five miles? This insight helps brands understand how far people are willing to travel for their service or products.
Better yet, these metrics can surface potential insights around a brand’s distribution channel. What retail partners generate the most engagement? Are there pockets of high engagement where a brand doesn’t currently have a store? Considering the consumer data on distance-to-discount ratios, these metrics begin to inform the marketing mix.
For example, a consumer around the corner from a store can easily stop in as a result of a location-based ad. If the product is unavailable, it’s not a major imposition on the consumer’s time. However, the person willing to drive an hour for that 50% discount is another story — that customer’s ability to check on product availability beforehand takes on greater value. Different information has value at different proximities.
The combination of mobile and location advertising is already transforming media, content, services and commerce. Location media is achieving mass market adoption, and raising consumer awareness around the value of location services and advertising. There will be a lot of experimentation and innovation along the way, but these best practices will help advertisers achieve success earlier and more often as they explore how to “locationize their brand,” and ultimately have a scalable impact on their business.
Image courtesy of Flickr, william couch.
More About: advertising, business, foursquare, location-based, MARKETING, media
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