Ross Mayfield's Weblog

Promoted Tweets and the Next Ad Recovery

A lifetime ago I worked on an Eastern European telecom group's IPO and one of my favorite slides in my deck was borrowed from Goldman Sachs to paint the picture of a Multimedia Cycle. Yes, I said multimedia, but right now there is something shifting in the ad market that may or may not mean a recovery to yet another boom for the internet.

Picture this in a cycle:

Ads -> Content -> Applications -> Telecom Services -> Telecom Infrastructure -> Repeat

In 2002 I described the multimedia cycle like this,

"Just as potential customer spending drives advertising expenditures, Ad spending drives the development of content to create ad space.  Development of content drives spending telecommunications services to delivery it.  Development of telecommunications services requires investment in applications and infrastructure."

I also pointed out how GDP is correlated with ad spend and noted that ad spending drives internet recovery.

In 2004 there were signs the ad market recovered and the Web 2.0 boom was getting started. Google drove advertising innovation. To the point where way too many bloggers thought they could live off it. This ad recovery fueled a venture boom and falsely led many startups to leverage someone else's business model instead of finding their own. Many of course didn't make it through the crash, and those that did focused on creating their own leverage.

Ad revenue isn't what it used to be. And it won't be. Which may lead you to have concerns about the current recovery:

• The last boom didn't deliver innovation in new ad formats and metrics, and there still isn't a solid ad model for social networks like Facebook. Put simply, advertising still works for the old web. More on this later...
• Ad commoditization is moving far beyond text ads into other formats. The display ad market has moved to Real Time Ad Exchanges (disclosure: I'm an advisor to Triggit, which helps helps buyers optimize real time spend). Conversion rates always decline as the audience becomes sensitized, with the recent exception to newer formats like video ads (won't last long.
• The B2B lead gen business has been cutthroat as well. 
• CPMs, CPCs, CPEs & CPLs are falling through the floor. In part this may reflect the broader economy, but every last efficiency is being wrung out of the markets.
• What this means is what we've known. That traffic & engagement are less easy to monetize than during the last recovery. Or at the very least less than what was believed at the time.

This may lead you to believe the multimedia cycle will not be fueled, and internet recovery will stall the creation of the next wave of startups. But things have changed.

In Apple's Garden of Eden, you can skip advertising and directly monetize your content and apps. Subscription and ad models are ready for the taking as well. But this forbidden fruit drives your app down to $.99 and you only get 2/3rds. You find yourself in the hit business, and usually it ends up being Hollywood's studio model instead of an indie.

Startups already have to innovate their own ad models, and rise above them. When shit lobsters (a complement) like ^Dave McClure are calling for coupons, that's what he means.

The big case in point is Twitter's launch of Promoted Tweets, the launch of Bill Gross' TweetUp and other new ad formats for the real time web like MyLike. It's not just about Twitter finally finding a business model, built upon the problem they created for brands. They are testing a new ad format and ranking algorithm that hopes to strike a balance between advertiser and user. And the real test is if they gain distribution through their search and other ecosystem partners starting tomorrow @chirp.

I'm going to go out like a bird on a limb here to suggest that it may be another tipping point for Twitter. One that involves actual tips. And supports a good portion of the ecosystem. This will serve as a litmus test for ad formats on social networks.

But the key for Twitter is if they can gain a distribution advantage for how they monetize. The qualms of them buying partners shouldn't concern partners, a lack of acquisitions should. "Filling holes" is a ridiculous analogy, btw. It reminds me about that story of a Dutch kid taking his finger to a dike. But not literally.

Others ad formats are arising, like with SlideShare's AdShare for professional sharing (advisor disclosure).The question I have is if new ad formats and other ad innovation will fuel another modest boom, because ads will always be a portion of new rising internet business models that are widely adopted. What form will they take? And will social gain a creative form that is valued as much as the creativity we have despite it.

From withholding to sharing information for Sales & Marketing

B2B Sales & Marketing has traditionally been driven by withholding information. A tradition that is turning on its head rapidly.

Marketing would entice a prospect with the lure of an asset, like a whitepaper. You fill in a form, providing your information, in order to gain access to information. PR held back on its best information to gain an exclusive with a top journalist. MarCom and Corporate Comms primarily added value by filtering outgoing information. Brand marketers held true to the one true promise of their brand. Sale held back on information to gain access to power. Want pricing? Get us in front of the decision maker. 

Social Media is changing all that. Want pricing? Tweet and you will find other buyers willing to share. Brands are a lie, except the conversations that define them. People who use to run filters now drive feedback. We've moved from a world of exclusives to one of inclusives.

Let me provide one biased example from a company I advise. Slideshare is turning the whitepaper industry on its head with a Business product called LeadShare. Lead generation is done in the context of a professional sharing community. You can provide the lead form in the middle or end of a presentation, whitepaper or webinar. This lets marketers engage through sharing the actual content before posing a more natural, "want to learn more?" to an engaged prospect.

My bet is that B2B marketers that share information will out perform those who horde.

Leadership and Management of Distributed Collaboration, and the Rise and Fall of the Chief Community Officer

Last week I was on a panel at Office 2.0 discussing "who owns community?"  Organizational Development was just one topic we explored, and ZDnet has a brief video excerpt.  In this post, let me clarify my comments.

Leadership in Distributed Organizations

My CEO Eugene Lee was recently an executive at Adobe and Cisco.  The transition over the past year wasn't just from Bigco to Startup.  Half of Socialtext's employees are distributed across four continents.  Eugene recently observed that "in a distributed organization, leadership matters more than management."

This isn't just about motivating distributed teams.  Distributed teams have higher coordination costs without a clear direction.  This is similar to Eugene Kim's point that "there is no such thing as collaboration without a goal."  An extreme example is viewing Wikipedia as distributed mass collaboration, where the clear mission of what to create and why not only attracts volunteers, but reduces the costs of coordinating them to the point where a phantom authority can work. 

At the scale of a distributed startup, leadership amounts to establishing a focus.  If you attempt to manage at the task level instead of providing a framework for team members to decide if something is within or without the focus of the team, the team isn't moving fast enough.  Management does provide the process discipline and measurements to sustainably keep the smaller decisions in check with focus, but it underperforms in abscence of leadership.  And there is another word for too much management, overhead.

When everyone works in one place, "management by walking around" comes at the cheap.  Walking around four continents is not. As our distributed collaboration tools get better at sharing social context as a byproduct of being productive, new management practices unfold.  I think we are just beginning to discover the practices for managing networked organizations, and one of them is the emphasis of leadership.

Who Should "Own" Community?

On the panel I answered with the always correct answer that "it depends."  But also suggested that ownership of community will trend in two directions.  Social Software has made community a strategic imperative for many organizations.  Recalling when risk management became a strategic imperative in some industries about ten years ago, you saw the rise of the Chief Risk Officer.  While the emergence of a new CxO function is fleeting at best, I was provocative to make a point that we could see the rise of the Chief Community Officer to align and coordinate internal and external communities.

Charlene Li twittered this, prompting a twitterstorm.

But there is a more likely scenario -- where community becomes a function of process ownership.  I don't beleive it will be left to specialist Community Managers who report into Marketing.  Community will become a facet of everyone's job.  Not just external communities for customers and partners and media and investors and developers and more.  Every process in the enterprise has the potential to be redesigned with more transparency and participation through Social Software.

At some point in the not-too-distant future, Process owners will lead communities.  They have the domain expertise within and around the process to drive conversation and collaboration around aligned goals.  However, it will take time to acquire community skills and for the organization to transition. 

360 Degree Process Communities

Let me illustrate this scenario.  Today ownership in corporations of customer communities commonly resides in marketing. This makes sense when you consider "Marketing is the whole business seen from the customer's point of view" (Peter Drucker twittered via Tim O'Reilly & John Battelle).  But marketing doesn't own all the more specialized processes that create this view, so Marketing Managers become traffic cops and attempt to interface the whole organization.  Customer communities are more sterile, homogenized and veneer than they will be in the future.  When people seeking support, sales, partner, developer and media conversations intersect primarily with one part of the organization that has its own goals and measurements -- you have an elephant trying to fit through a keyhole and nobody knows who has the key.

Before issuing a call for a COO, consider this evolution.  Support often is the next group to take ownership of its community.  Sometimes there is organizational alignment behind it (the VP of Support also owns Product Quality, or dotted lines with Marketing).  With this more specialized ownership, the VP of Support then manages two communities and possibly a third.  Contact Center employees and customers seeking after-market product support, and potentially tapping across the entire organization to help resolve exceptions. 

This is a 360 degree view of community around a set of processes.  Consider the same for Marketing.  More specialized ownership would have them transition MarCom processes into driving the conversations around those communications.  But also increased focus on internal communities, beginning with their most important customers, sales (we just concludes a webinar series on collaboration between marketing and sales, available for download).  In today's market, where 50% of consumers trust the voice of the rank and file employee over the CEO, the more active Marketing is in internal communities, the more successful external communities become.

Initially, 360 Degree Process Communities will be formed by front office such as marketing, sales, business development, professional services and support.  HR has already begun this evolution within the back office.  And while you may discount it at first thought, don't rule out process communities in back office functions like finance where you least expect it.

Process to Practice

Mike Gotta once made an important distinction clear for me.  That Process is "how work should be done."  And Practice is "how work is actually done."  When process fails (exceptions), people use practice to fix things.  When process doesn't exist, practice fills the void.  While people don't realize it when they engage in practice, they actually are tapping into community -- an informal social network within or beyond the enterprise to discover expertise and get things done.  The problem is that we haven't had the tools to support good practice.  The problem is that we haven't developed the group memory around practice that creates institutional leverage.   In fact, we still design organizations to prevent practice and cultures that hoard knowledge and communities.  With all the focus on Process Execution, its time to instill at least awareness of Practice Execution.

Service and the Fifty Percent Rule

Next time you go into an Apple store, notice that 50% of the space is for retail sales and 50% for service and support.  I overheard this weekend that it is the most profitable arrangement in the history of retail. 

True or not, it is curiously obvious that complex products not only need after-market support, but giving it equal treatment increases profit through customer satisfaction and loyalty.  Plus all the cross sales when you have to walk through the retail space or wait a bit.

By contrast, you have to walk through a cramped support department to get to things at Fry's.  After some extreme frustration there I shifted my technolust procurement to Best Buy.  Their service department is clean, well lit and all, and they do have that Geek Squad specialization.  But recently I attempted to have my six month old PS3 serviced there, but apparently they will do absolutely nothing for in-warranty products unless you buy some kind of extra insurance at the time of purchase.  Absolutely nothing.  So I had to call Sony and go through a ship and repair process.

This is in contrast to when my wife's camera broke under warranty and Keeble & Schuchat sent it to Canon and called us when it came back to the store for pickup. Simple enough, and I bought a tripod while there.

What Best Buy is missing is the fact that they provide no after market value add with their retail -- in comparison to buying and servicing with an e-commerce vendor.  If I buy something in person I expect a person to be able to help me when things go wrong.  At least during the manufactures warranty, and I might pay to extend that period with the retailer.

But I think Apple gets something more than the value of customer experience.  According to the Consortium of Service Innovation, there is an iceberg effect for product knowledge.  90% of conversations about supporting products never touch the company.  Only 10% touch the call center.  And 1% of this service and product quality knowledge are assimilated. 

Sometimes this distribution is purposeful.  Support is viewed as a cost center.  Time to resolution (which we've decreased by as much as 30%) often trumps customer satisfaction or capturing knowledge.  Worst practices are often employed to incent contact center reps to avoid contact.

The problem is far worse with multi-vendor support.  Multi-vendor issues take 3-4 times longer to resolve.  So almost all vendors explicitly do not support these issues at all.  There is some promise in Vendor Relationship Management, or communities that address systemic needs through the demand side supplying itself, but only the beginning of promise.

So I wonder if Apple's vertical integration strategy is what makes this possible.  Is the 50% rule only a rule if you tackle the multi-vendor support problem?  Alignment or integration between Marketing and Support plays a role and some organizations put the same person in charge of Product Quality and Support.  But this opportunity space inherently requires rethinking not just organizational boundaries, but the firm itself.

For your business online, what porportion is dedicated to retail vs. support?  When not constricted by the boundaries of physical space, and can be empowered through community, where do you draw that line?  What crosses that line is a process not unlike osmosis, where energy is released with the right balance.

UPDATE: article in the Boston Globe on listening and participating to online conversations about service and support

Interview on Social Media and PR

Justin Kistner of Voce Nation just posted an interview with me on How Social Media Changed PR.

I think what he said would be of interest to some of our other clients as well as to other PR professionals. There is some good fodder in here for further discussions about:

- What is the big shift in PR and why are people split about whether or not to be happy about it?
- What is the role of a modern PR firm?
- Tactically speaking, how has the PR process changed?

Why The Marketing World Can't Turn

This was originally posted in a private space for the SAP marketing community.

Marketing professionals don't have difficulty "getting" Social Media. They are apt to play on Facebook, network on LinkedIn, read and possibly write on personal blogs and Wikipedia. If someone wants to engross themselves with the tools, they can as consumers. And there is far too much blogged about what it means for their business than most have time for. But when it comes time for a Director of Product Marketing to pitch for budget on a Social Media, things may grind to a halt.

The reason is we are still developing the language, let alone the numbers, around Social Media as a marketing investment. David Meerman Scott  notes correctly that Viral Marketing is not about sales leads.  Same for Social Media.

The hardest part of adapting your marketing thinking is that the predominant pattern in Web 2.0 is sharing control to create value. You see it in communities like Wikipedia or YouTube. You see it in business models like Open Source. You see it when the conversations around your brand happen without you. But there is no buy vs. build equation for deciding to share control. The decision to put intellectual property into the commons does not yet have tools to forecast return.

We think we have marketing down to a science. And we use the language of war -- campaigns that divide targets for capture. Lead generation often comes with guarantees. The ROI of a campaign is supposedly known in advance.

But I'll wager that the campaigns that have the best known returns are the ones your audience is most sensitized against. If not simply viewed as spam. And those campaigns are done at the greatest distance from the customer, if not increasing it.

The Edleman Trust Barometer tells us that in six out of ten countries surveyed, individuals trust their peers to inform decisions more than institutions. And half believe the word of a rank and file employee over a CEO. (yes, I've quoted this twice on this blog) We've been erroding trust, not just in the private sector. And with the NetGens entering their second year into the workforce, they bring even stronger attitudes about social influence.

They say you can't manage what you can't measure. I'd suggest you can measure social marketing, but with less leading indicators. Stop thinking about the number of impressions, but who you impress and more importantly who they impress. Referrals and references are a mainstay of enterprise software, but you need to find new ways to engage and attribute them to return. How can influence a decision maker without witholding information from them and a wider market? What processes can you redesign by making them more transparent and participatory? How can you foster deeper relationships on mutual trust that lead to others?