Twitter Business Model

The other day Sarah Silverman tweeted a somewhat vulgar complaint about American Airlines.  I'd post it here but it looks like she deleted it from her Twitter account. Her complaint regarded a connecting flight that was cancelled after a 7 hour layover.

Following her tweet, a short discussion ensued between Sarah and her followers about the poor service they've experienced from American Airlines.

As of today, Sarah has 1,692,580 followers.  To give you a sense of her reach, that's approximately the same number of people that will see this 17,000 square foot Walgreen's billboard that rises 340 feet above Times Square in a 24 hour period.

Imagine someone posting a complaint about your company on this billboard?  The damage that can come to American Airlines and other consumer businesses from Twitter is significant.

I know several companies (particularly airlines) are already using Twitter to communicate with frustrated customers.  I believe there’s a huge B2B revenue opportunity here for Twitter.

If I was American Airlines, I'd pay a lot for a Twitter application that would integrate into my CRM or customer service software where I could view all of my @mentions sorted by the number of people that follow the Tweeter.  If American Airlines is able to turn Sarah into a happy customer and can get a positive Tweet from her, they’ll get 17,000 square feet of Times Square advertising for $0.  A pretty good investment to make in one customer.

I have no idea if Twitter is already doing this or if they're considering B2B CRM as a future revenue stream.  But it seems to me that there'd  be a significant revenue opportunity if Twitter was able to effectively integrate their reach, data and users into a company's CRM systems and process.

Bad Negotiators Use Emotion to Negotiate

I just went on a rant about this and a colleague told me I should blog about it so here goes. I had a call the other day with a big client. The call was a preliminary negotiation call. We’re going to discuss terms of an agreement extension in a couple weeks.

From the outset of the call, the client surprised me by being both rude and confrontational -- lots of sarcasm and sighing. They explained that they might want to go to RFP. Oh, and of course, they want a fee reduction this year.

Not a nice way to start off a call between two companies that have had a very positive relationship for many years. Why would they start the call this way? Are they just rude? Are they really mad?

I don’t think so. My answer is that they’re bad negotiators that don’t want to do the homework and preparation required to get what they want.

Good negotiators don’t do this. Good negotiators are polite, friendly, do their homework and have ruthless, rock solid business angles as to why they should get what they want. Good negotiators don’t simply threaten to go to RFP; rather, they build leverage by citing the rational, business reasons why they might end up going to RFP (budget cuts, poor performance, shifting priorities, changing markets, competition, etc.).

When negotiators don’t have rock solid, logical business arguments they’re forced to rely on fake, insincere emotion to make their argument.

My advice: rather than put yourself and the people on the other end of the phone through this nonsense, reschedule the call for a later date until you can do your homework and prepare your angles. That’s a lot more fun and productive than just pretending to be mad.

Drip Marketing

In an earlier post I wrote about what makes a good Tweet. The best Tweets are those that make me laugh or provide me with an interesting insight or make me look at something differently I follow about 150 people on Twitter and I have a pretty high bar for what I keep in my timeline. If a Tweeter isn't adding some kind of consistent value in those 140 characters, I'll stop following them.

There are a lot of similarities between being a good Tweeter and a good marketer. If what you're saying to prospects/clients isn't highly valuable and said very efficiently, it's a matter of time before they tune you out.

I've begun pushing my team to have "Twitter-like" conversations with clients and prospects; I've also heard this referred to as "drip marketing". That is, provide the client with regular, short and highly interesting/engaging/insightful pieces of information (most often without an ask) that educate the recipient and -- just as importantly -- change their perception of what you do in a favorable way. I like to think of these as small, mutual gifts -- they provide both parties with some benefit.

Ideally, I've asked my team to try to keep their drip emails down to 140 characters, though depending on the message this can be quite challenging.

Regardless, the aspiration is simple: be really concise and be really interesting.

7 Key Client Management Lessons

A few weeks ago I was asked to teach a "Client Management 101" class. I was happy to do the class but wasn't all that excited about its title.

I believe that the basics of client management are mostly intuitive.  And the parts of it that aren't intuitive can pretty easily be found in a book or online.

So a class on the basics of client management wouldn’t be very interesting or insightful and wouldn’t really make the listeners any better at client management -- not to mention it wouldn’t be very fun to teach.

So I decided not to teach the basics; instead, I came up with a list of 7 key lessons or insights that I've picked up over the years that would've helped me quite a bit had I understood them when I started my career.  Some of them are provocative and many of them are counterintuitive.  I decided to keep the list to 7 because it forced me to pick the most interesting.

I put the 7 lessons into PowerPoint, added some personal stories and took the class through each lesson one by one.  The class was very well received and spurred some great conversation during Q&A.

I thought I'd capture and share what I presented on this blog.  Here are the 7 Key Lessons:

1. Lead, Don't Follow
2. Partners, Not Customers
3. Manage Expectations (it's easier)
4. Ask for More
5. Everybody Has a Boss
6. Know Your Audience
7. The Bigger the Crisis, the Bigger the Opportunity

Posting them all at once would make for an extremely long blog post…so I’ll post them individually over the next several weeks.

What We Don't Know

Donald Rumsfeld, former Secretary of Defense, said this back in 2002 when responding a to a reporter’s question about links between Saddam Hussein and terrorists seeking weapons of mass destruction.  It came up again Monday in a column in the Wall Street Journal. “As we know, there are known knowns; there are things we know we know. We also know there are known unknowns; that is to say, we know there are some things we do not know. But there are also unknown unknowns: the ones we don't know we don't know. And if one looks throughout the history of our country and other free countries, it is the latter category that tends to be the difficult one."

I’ve always loved this quote; it’s very humbling and so true in business and life (and of course politics and war).

In short, there are things we don’t know that we don’t know we don’t know.

Poke the Box

I just finished reading Seth Godin’s new book, Poke the Box.  Much like the book, I'll try to keep my thoughts concise -- it's only 96 pages.

Like most of Seth’s books -- I’ve read most if not all of them-- Poke the Box promotes a very simple concept.  Seth probably could’ve communicated what he was trying to communicate in a couple of blog posts; actually, he could’ve summed it up in a word: “Go!”

Poke the Box means make change, make it happen, start, don’t wait, ship!  Shipping is what matters.

It was a  quick read and I’d recommend it if you have a few hours to kill on a plane or if you're feeling like you could use a good kick in the pants.  The book wasn’t all that insightful -- most of what Seth had to say most of us already know,  but it was filled with good reminders that can help motivate.

For me, the two most notable reminders were:

1. Get started and iterate like crazy.  Sometimes the best thing you can do is simply move.
2. Most initiatives don’t work so don’t be afraid of failure and don‘t get frustrated when they don‘t work.  Real failure is when we don't start.

Of course sometimes the hardest thing about starting is knowing when to quit.  Seth tried to answer that a few years ago in The Dip.

All in all, a solid, quick read.

What Makes a Good Tweet

I've been using Twitter for two years. I check it almost everyday and follow about 150 people. It's a unique social graph for me in that I follow almost no friends or colleagues. I don't use it to interact, I use it to be informed and to learn. By the way, Fred Wilson has been writing some interesting stuff on the different social graphs we use and what he calls "implicit social graphs" -- social graphs that get built for us rather than by us -- definitely worth reading.

Anyway, so much of what I see each day on Twitter is wasteful: boring personal messages, links to sites I'm not going to click on, self promotion, etc. But I keep checking it reguarly because every few days I find a gem -- a piece of information or an insight that makes me laugh out loud, makes me more informed or smarter or causes me to look at things differently. I love when that happens.

I realize different people use Twitter for different reasons so they're free to Tweet whatever they feel like Tweeting.  But over the last two years I've noticed that the best Tweets, the Tweets that are really valuable, seem to have these  four things in common:

1. No web links; all of the information is communicated in less than 140 characters
2. No hashtags (#), they're annoying, unless they're added to make the Tweet funny, which can work sometimes -- see @bronxzoocobra
3. No @s, unless it's a Retweet; generally conversations on Twitter are lame
4. They aren't a simple statement of what someone is doing or where someone is; e.g. "mowing the lawn" or "at the movies"

To do this well you actually have to think pretty hard, you have to initiate, you have to create. That's why these kinds of Tweets are the best, and probably why they're so rare.

The Perfect Music Service

Amazon announced yesterday that they’re releasing an online service (a “cloud”) that allows people to store their digital music and access it from various digital devices, though they still have some legal work to do in sorting out licensing issues with the record labels. I’m a big fan of Amazon and the announcement got me thinking about the different music services I use and what I really want out of a music service. Currently, I use iTunes to buy music and Pandora to discover music and Last.fm to log my top artists, albums and songs. I don’t subscribe to any of the steaming music services like Rhapsody and I don’t yet interact with music-based social networks, though I could with my Last.fm profile.

All-in subscription services like Rhapsody are very appealing -- all the music you want, on-demand for 10 bucks a month. The industry consensus seems to be that the subscription services generally target listeners that have more money than time and ownership services like iTunes target listeners with more time than money. I can afford the subscription service but there’s something about owning my own music library and being stuck with it that’s appealing to me. Sometimes having limited options can be a good thing.

All that said, using three different services is a pain and there are still some things I’d like the services to do that they don’t. In a perfect world, here’s what I think an all-in-one service would include:

• Cloud: all of the music I own (my library) could be easily accessed through the service and on demand on my home or work computer, or on the road with my BlackBerry, iPad or iPod
• Discovery: the service would include a discovery component with various stations that could be streamed to any device (similar to Pandora now) but I could easily switch between channels that include songs in my library and channels that don’t
• Ownership: I could buy a song or album and add it to my library at any time
• Social: my library and listening history would be captured regardless of where or how I’m listening to it and could be viewed by “friends” and vice-versa
• Live shows: a calendar with dates and venues based on zip code for every artist in my library as well as an option to see recommendations for shows based on my library
• Recommendations: an area where I can see recommended albums based on my music library/listening history/friends tastes
• Music Information: artist profiles and news, upcoming releases, charts, etc.
• Advertisements: Option to pay higher fee to remove them

Because of the economics of the music industry I realize that I’d likely be paying a monthly fee in addition to per-song fee/album fees, and that's ok.

The digital music industry will very likely continue to be fragmented for quite a long time and there’s no doubt that different listeners have different needs that can be met by different services. But I’d bet on the service that is able to flexibly and cost effectively blend ownership, discovery and social into one platform.

Product vs. Marketing

Fred Wilson and Jim Keenan, two bloggers that I admire, had a couple of interesting blog posts over the last few weeks that have got me thinking. Fred’s post was titled Marketing and the Bubble and was a follow up to his controversial Marketing post.  In Marketing and the Bubble he uses the really interesting graph below (submitted by a commenter) to illustrate how in the last few years the pendulum of focus for startups has shifted towards product and away from marketing (the focus of the last bubble.)  Fred says:

 “…I am certain that experience has caused me and my partners to view marketing oriented startups with a fair bit of caution.”  

Jim’s post is titled Product Surpasses Sales, the key line is:

“The Internet has shifted the balance of power from sales to product.  They’ve always worked together, but it has been sales leading the way.  Things have changed.  With the ubiquity of information, it’s the product that now leads sales.  A good, strong, innovative product is far more important today, than the best sales team in the world.”

Rather than taking a side in the debate over product versus marketing, I’d like to make two points that I think should be kept in mind:

1. How much you prioritize marketing investment depends on your lifecycle stage, industry, product, customer base and the current market.  An early-stage biotechnology startup trying to develop a vaccine for bacterial infections likely needs to focus mostly on product.  A startup distribution company that resells telecommunications equipment to small businesses probably needs to prioritize their marketing.
2. Regardless of the above, I believe that your best sales & marketing (externally facing) people should be doing two things: a.) supporting your product and product team by interacting with the market and early adopters, generating intelligence and identifying the products that your customers want but don’t yet know they want and b.) influencing customers and potential customers by telling stories that speed up the diffusion of your most innovative and next generation products into the market.  If you find that your product is so amazing that it gets ahead of your marketing people, it doesn’t mean that marketing isn’t a priority, it just means you need to get those people focused on the harder stuff -- the stuff that your product isn’t doing yet.

Milo

I wish I had known about Milo when I wrote this post back in April of last year.  Milo's mission from their site:

Milo's mission is to track every product on every shelf of every store in real-time. We see ourselves as building a bridge between online and in-store commerce that empowers the consumer to access the best of both shopping worlds—all in one place.

Basically, with Milo, you can check in-store inventories and find the best in-store prices online.

Bridging the gap between offline shopping (a trillion dollar industry) and the internet is an enormous opportunity that Milo was able to take advantage of.

They started just a few months before I wrote this post, completed their Series A round in November of 2009 and were acquired this month by eBay for $75 million.  Nicely done.

Groupon at $6 billion?

Rumor has it that Google is going to buy Groupon, the premier localized “deal-of-the-day” website, for an astronomical $6 billion.

If a $6 billion valuation for a company that started less than two years ago that competes in an industry with almost zero barriers to entry seems crazy, it’s not.

Groupon has 30 million subscribers.  Assuming that Google is paying a 10x revenue multiple for this business, they’re estimating revenue of around $600 million per year or $20 per user per year.

Using some reasonably conservative numbers, the revenue model they're using to justify such a valuation could look something like this:

• 30 million emails sent per day
• 5% click-through rate
• 10% buy rate
• $10 revenue per buyer
• 365 days per year

That gives Groupon revenue of $547 million per year, just short of the 10x Google valuation.

My math includes a lot of assumptions and has a lot of moving parts so I’ll be the first to admit that there’s plenty of room for error.  But it does show that this valuation isn’t as crazy as some are suggesting. 

With all of that said, there’s quite a bit of risk to Groupon, specifically in the form of competition and acquisition and retention of merchants.

One report said that in Boston alone there are already more than 50 Groupon clones.  The business is extremely easy to setup; just hit the streets with a media kit, write some catchy copy and some simple code.

And the reports of unsatisfied merchants keep coming.  With all of their competition, their rumored 50% revenue share is not sustainable.   I’m also told that their first significant national deal with the Gap -- 50% off with no restrictions -- will never happen again.

Regardless of whether Google is paying too much or too little for this deal, this should be a fun one to watch.

Healthcare: South vs. North

I read yesterday that many are accusing Obama of trying to equalize the north and the south.  One example of this can be found in the recent news that several states are suing the federal government, stating that the healthcare bill is unconstitutional.  

Specifically they’re focusing on Medicaid (government funded healthcare for the poor and disabled). Generally, southern states are more restrictive on Medicaid payments; northern states are more generous.  The healthcare bill would allow the federal government to force the southern states to adopt the Medicaid standards of the northern states, but without any federal funding to pay for it.  This is what’s known as a “unfunded federal mandate”, and is a major reason why many believe that the bill is  unconstitutional.