Lairig Marketing

The New Digital Divide

Way back in summer of 2011, we brought to your attention the challenged business model of renowned content farm Demand Media. Its share price was already down to $15 at the time, from its early-2011 IPO high of $27.

Here’s an excerpt:

“…[this] is why Demand Media’s stock might continue its ride downward. It doesn’t generate ‘heavy readers’ or ‘fans.’ Just ‘fly-by’ Web searchers. DMD’s advertising-based business model requires millions of ‘fly-bys.’ And a million-plus-one the next day, and so on.”

A year-and-a-half later, it’s clear the business can’t scale. DMD's stock price continued to fall all the way to $5, and for the past year has found a home around the $8 - $9 range.

And so, a year-and-a-half later, Demand Media management has decided to try a revenue stream outside of the ad-supported content model. The old “go to” of PAY AS YOU GO.

That’s right...the revenue model that all the digital-content experts claim won’t work, because all Web content wants to be free, should be free, must be free. The revenue model that’s working a la “paywalls” for many newspapers. The revenue model now being pursued by “hot journalists going independent” like Andrew Sullivan.

Demand Media’s first foray into “pay for content” (e.g., rather than banner ads) will come via its recent purchase of Creativebug, a crafts site, where you can pay on the average of $1 a minute to watch “how to” videos of such mindbending topics as “How To Create A Family Journal.” Or you can pay $17 a month, and see every minute of the dozens of videos about quilt-making.

Scary, no? Americans will gladly pay for “Drawing With Thread,” but NOT ONE GOD DAMN PENNY for news analysis from The New York Times.

But, lest you think the ad-supported revenue model is passé in the future digital landscape, let’s take a look at YouTube.

YouTube, as we told you here, also plans to pursue the “pay for viewing” model. With a vengeance. But it obviously feels the ad-supported model is still viable long term, with just a few tweaks. A month or so ago, DigiDay reported this:

“YouTube is increasingly selling its advertisers longer ad placements that smell a lot more like content than they do advertising…Some of the placements are as long as five minutes.”

That’s no typo. Pre-roll video ads that last FIVE MINUTES. Think about that next time you go browsing YouTube for the millionth (60-second) rendition of the Harlem Shake.

This divide in approaches to making “digital money” shows that despite all the blowhard prognostications, no one – no one – has any idea what is going to work.

Meanwhile, marketers continue to move more and more of their scarce dollars toward this black, and divided, hole.

BIG Data Can’t Even Solve This LITTLE Challenge

Continuing Monday’s theme of things in Marketing we are not particularly fond of, here is another look at Big Data, the meme that keeps on meming (see here and here for our earlier knocks on this dopey topic).

Back in April of this year, Epsilon released another of its quarterly reports, highlighting email stats assembled from its proprietary data set (official name = North America Email Trends and Benchmarks Results). At that time it included, for the first time ever, data related to “triggered email messages” – emails sent as a consequence of a time trigger (e.g., customer birthday) or behavioral trigger (e.g., customer applied for a loan).

Epsilon found that triggered email messages comprised less than 3% of all emails sent during Q4 2011. Not surprising, given the “spray and pray” mentality of email marketers.

But the next bit of data was a big surprise: triggered email “had 96% higher open rates and 125% higher click rates” than all other email message types.

That should have caused a riot, but as usual in the marketing industry – since it had nothing to do with social media – NOBODY NOTICED. Imagine if someone told your financial planner that there was a way to double his clients’ return, yet he did nothing. You’d fire him.

What an opportunity for “Big Data.” And really not that “big” a task. Example: for every person who abandons an online shopping cart – which still happens most of the time someone starts filling one – an email should automatically be triggered, with a tailored message and offer. This would require just two data bases, and one person’s time for about 23 minutes a day.

What an easy proof point for “integrated real-time blah blah blah” data-driven marketing. But the Big Data folks are too busy with Big Talk. The Etailing Group found that "abandoned cart emails" are actually being sent LESS frequently than ever. And Epsilon’s latest benchmark report shows triggered emails still account for LESS THAN 3% of all emails.

Big Data – a big ol’ lumbering elephant. They should let the little guy lead the pace for now.

Can AOL Patch Patch ?

Every time you turn around, it seems, the pundits at BIA/Kelsey raise their forecast for “local” digital marketing by another half-trillion dollars or so. The folks at AOL’s community news division, Patch, aren't getting the memo.

The inside skinny says AOL (which we are supposed to spell as “Aol.” but c’mon) lost around $100 million on Patch last year. Troubling, when you consider it operates upward of 850 community news sites. It would take an extra $2000 a week in ad sales for each site for Patch to be at breakeven.

Can it be done?

Patch often gets thrown under the "content farm" bus, perhaps a bit unfairly. This isn’t really a “scrape” operation, and it has a well-regarded management team and editorial board to boot.

In addition, the Patch sites try hard to solicit reader input – blogs, pics, event listings. There is decent effort given to support of local charities. Its heart is in the right place.

But go to your local Patch site now and take in the look and feel of the site. Try out the navigation. And note the advertising layout. This has About.com written all over it.

We’d point the designers at Patch to the Evian site we wrote about last week – "The Source" – for some inspiration. And the navigation needs a complete rethink (example – do small-town folk really need a separate “Commute” tab?).

Site design suggestions don’t directly drive revenue. They would, though, drive higher readership, which makes a better sales proposition to local advertisers.

Where Patch can boost revenue directly is in an area underappreciated across all content sites – the comments section. If there is one thing locals have, it’s an opinion. And they are not afraid to share it on Patch. The littlest issue can set off dozens of comments.

Where there are no ads.

Someday, after all the research about smartphones is exhausted, someone smart will publish a quantitative study on the amount of time spent, page views, etc., in the comments sections of news sites.

And then, someone will invent a Disqus-like tool for advertising alongside comments. They will become fat, rich and happy.

For now, though, there’s not much to be happy about in Patchville.

Google Does A Double Split

While the "Do No Evil" guys shocked Wall Street with its faux (and evil) stock split, announced during last week’s quarterly earnings review for Google, there was another “split” discussed, and it seemed to fall through the cracks.

Over the two days following the call, GOOG fell $35 (nearly 5%), made worse by $10 of pre-announcement run-up. Google didn’t meet expectations in a key metric – cost-per-click for the paid-search business that still constitutes the bulk of Google’s total revenues.

Cost-per-click “growth” for Q1-2012 was negative 12% compared to a year ago, and down 6% quarter-over-quarter. This metric caught everyone’s eye in Q4, when Google saw the first year-over-year decline in CPC in more than two years.

CFO Patrick Pichette had this to say, in an attempt to calm listeners on the earnings call:

“…dynamics around CPCs and paid clicks are just simply very complex…”

SIMPLY complex. [We love reading earnings transcripts for these verbal tics…]

Pichette then spun the complexity wheel by stating the CPC decline was driven by five factors. The one marketers should pay attention to = “…the shift in search activity from desktop computer to mobile computer.” This is the other “split” that everyone else might miss.

This, of course, is not good news looking forward, unless the many, many hands on the mobile advertising steering wheel get it together. One major driver in raising CPC is demand (i.e., more marketers bidding on a keyword, ratcheting up its price), and as we have said at Lairig Marketing about a billion times, “The Year of Mobile Advertising” is about six years late.

One wonders when someone will come up with the idea to track the CPC metric for iPads and other tablets SEPARATE from smartphones. The delta there must be significant, and getting larger over time.

The mobile CPC dynamic will certainly impact Facebook, but will be a discussion that won’t take place before the IPO, we wager. But you only have to look at Pandora’s stock price to see what low mobile CPCs mean from a business standpoint. After debuting at $16 last June, Pandora tread water around $12 until this March, where it has trended straight down to $8-and-change.

Mobile CPC is indeed a sensitive topic. When a Barclays analyst took another attempt at interrogating Google’s cost-per-click performance on last week’s earnings call, CEO Larry Page had this to say:

“I'm just going to close the call here…”

And then he split.

Flurry’s Flurry of Bullsh&t Data

With all the outcry over SOPA and PIPA, we continue to be amazed that no one (other than Lairig Marketing) – NO ONE – has bemoaned the privacy risks associated with online analytics vendors. Companies such as Flurry, who explains itself thusly:

“…the world's leading mobile application analytics and data-powered advertising platform, with more ground breaking [sic] services in development.”

No idea what that means, but we eagerly await the promised earthquake (sorry for the reference, El Cerrito).

Here is an example of what Flurry has access to:

“…[we take] a sample of 60,000 daily active users on iOS, from among a total group of 6 million for whom we have demographic data…”

Flurry knows who you are and follows you all around every single place you go on your smartphone, all day long. And there are dozens more similar companies. You either don’t know or you don’t care. Potentially a much bigger story than Google and Safari, but we digress.

Flurry has been able to parlay all this snooping into two large helpings of marketing analytics catnip. The trade press and blogarrhea live for headlines like this:

1. “Flurry finds mobile apps usage dominates Web.”
2. “Flurry finds time spent in mobile far outpaces ad spending.”

Let’s take the first one, um, first. There was something else Flurry found out in that study that no one mentions, ever: half of the 90 minutes a day an average that a smartphone user spends on apps is – drumroll – PLAYING GAMES.

All these people you see coming straight at you, heads down, on the sidewalk? Playing Pac-Man. Or whatever. (Still wondering why there is high unemployment?)

The next 30% of “apps time” is spent on social networking (read: Facebook – still wondering why there is high unemployment?).

And so you have one reason from Flurry’s first “finding” as to why its second finding is nonsense – ad spend is low on mobile because the apps people are using are not suited to it.

But that’s just a sliver. In fact, Lairig Marketing wrote about this “underspending” topic – BACK IN MARCH 2008 – when data pundits of that period were wailing about how online ad spend allocation wasn’t aligned with people’s time on the Web.

Here is a summary of what we said then, and still say now. Four years later, the % allocated to online spend is still lower than the % of users’ time on the Web – and therefore mobile will always be “under” – because:

• Cost of ad production is infinitely lower than TV or print
• Cost of online media is pennies on the TV dollar
• TV still has better mass reach
• Average people are not your customers

Please, please help us pass the word the next time you see this “underinvestment in mobile advertising” claim.

In the meantime, here is an example of what Flurry knows that ought to make privacy advocates sh&t their pants:

"...our analysis shows that females and males, between the ages of 25 and 34, who have higher levels of disposable income and a bachelor's degree or higher, more strongly interact with mobile ads.”

Branded Content’s Dirty Little Secrets

So, if user-generated content is really just a lot of consumer masturbation, what is happening on the brand side of the equation? Are marketers getting their collective arms around the challenge of “branded content” ?

That challenge comes with four main hurdles:

1. Having something valuable to say
2. Having the resources to write it
3. Getting customers to find it/read it
4. Getting the entire company to agree on its value

You will find the above list nowhere else, even though a billion “Five Tips On Branded Content” posts have been published…this week.

It’s incidental, in any case, since 50% of marketers haven’t cracked the code on point #1, and 90% of the remaining 50% won’t rightfully address point #2.

So, there really is nothing to do with this topic but sit back and chuckle at research like the following:

In mid-December, an outfit called “The Custom Content Council” attempted to estimate what marketers spend churning out…er, custom content…coming up with an average of $1.9 million per company. Sorry, carry it out to another decimal place = $1.91 million.

On an absolute basis, that data point fails hurdle #1 above. But there were a couple of “relative” nuggets of value in the council’s research. To wit:

• Around 25% of content spending was said to be in digital formats. Seems low, given the focus on email and website content, and implies there are still a lot of hardcopy newsletters, journals and such keeping the USPS barely afloat.
• Around 25% of companies claim that custom content efforts consume 25% of their total marketing budgets. As the kids would say…ROTFLMAO.

Vis-à-vis the hurdles above, here is where we really are:

1. Talk about our products
2. Assign the writing to an unqualified, low-paid team member
3. Fling it in the customers’ general direction
4. Hope no one in the C-suite asks for an accounting

Garbage out. Garbage in.

User-Generated Mal-Content

When it comes to generating participation in contests, surely all of today’s marketers can leverage the various and sundry new-fangled digital tools, and jump the bar set by Scotch tape way back in 1956?

No, they cannot. And stop calling my Shirley.

Here are a few examples from just the past three months, that illustrate a profound lack of originality, brand utility, and business benefit.

Sickening
The only reference to foursquare we’ve come across this year: TheraMax asked users to “check in” using their smartphones…at a drug store where they would be looking for flu medicine?

No! At a TheraMax ad running in Times Square. Somehow, a company rep would find the checker-inners, and hand them a sample of meds. Even if they weren’t feeling flu-ish.

Not So Spice-y
McCormick figured the best way to get consumers to use its millions of spices this past holiday season would be contests like “The Big Cookie Share” and “The Merry Merry Menu Planner”…contests where people would bake real holiday treats?

No! Consumers were asked to (a) make a digital cookie, post it on Facebook and SHARE IT WITH YOUR FRIENDS; and (b) post two “theoretical” holiday menus to their Facebook page and SHARE IT WITH YOUR FRIENDS. [phrase in caps to be spoken in a desultory sing-songy fashion]

Company spokes-hacking: “…we are offering our fans new ways to share the holiday spirit and create memorable taste experiences…” I, Santa, Robot.

Gimme To The MAX
“Pepsi MAX for Life” (spokes-hacking: “a search for our most passionate fans”) allowed consumers to win a twelve-pack weekly, provided they submitted the best video…showing them actually drinking the product?

No! Just tell Pepsi why you deserve it. In a video that could be uploaded, SHARED WITH YOUR FRIENDS and voted on and whee whee whee all the way home.

Cold Coffee
Krups USA is again holding its "Krups Best Brew Awards,” in which people vote for the “best coffee shop across the nation.” The nominees are required…to use Krups coffee-making equipment in the store?

No? Whatever, dude. Just nominate and vote. But it can only be done on Krups’s Facebook page. Dude.

Chew Not On This
Quaker Chewy Granola Bars got together with heartthrob Nick Jonas to conduct an American Idol-like singing contest, given the God-awful name “Quaker Chewy Superstar.” The video winner had to…sing about the granola bar and/or eat one during the video?

No! Just sing, dammit. We’ll get to that stuff about helping grow the business later.

The Im-Moral Of The Story
Yes, digital user-content contests are free and ego-enhancing for marketers. But they are an abhorrent waste of time for the consumer, insulting his or her intelligence. Except, of course, for the ones who appear to possess very little (i.e., contest entrants).

Be original. Require real, not digital, product usage. Have a measurable benefit to the business. And don’t restrict your contest to Facebook, given that at least half your consumer base doesn’t go near it.

There you have it. Digitally. Now get out there, and SHARE IT WITH YOUR FRIENDS.

User-Generated Content Circa 1956

In what might become a week-long series, today’s post looks at the fever-pitch topic of “content.” Almost as prevalent as articles about Facebook, Pinterest, and “The Five Reasons You Need A Social Media Strategy,” you can’t surf very far without tripping over flotsam like this, from the current issue of B2B Magazine: “Content Marketing Becoming Vital.” zzzzzzzz.

Our perspective for today’s post looks at our old friend, user-generated content, which we took to the woodshed back in January of 2010. The most ironic thing about UGC over these last three years or so is that marketers believe they’ve invented something.

As with other digital marketing “innovations,” they are wrong. Consumers have been submitting “content” to brands for a very, very long time. The fact that it can now be done digitally doesn’t delete history.

Consider this date – July 11, 1956. That’s when 25 families from across the U.S. descended on Disney’s new California theme park for a free week of fun. Among them were the Barstows, whose nutty dad recorded the whole thing on film.

They got there by entering a promotion for 3M Scotch tape (or as we would call it today, by SUBMITTING USER-GENERATED CONTENT). All contestants needed to do was submit an entry that paid off on this half sentence: “I like “SCOTCH” Brand Cellophane Tape because…”

Little four-year-old Danny Barstow won for writing the words above and those below on a big poster:

WHEN SOME THINGS TEAR THEN I CAN JUST USE IT.

Actually, he didn’t write it himself. But he did add “DANNY” in all mismatched letters at the bottom.

Hard to know why 3M selected Danny as a winner. Probably because the Barstow family of five submitted SIX entries, all in one big-ass box. (As proof of how consumers have always been more clever than marketers, the Barstows cashed in their FOUR first-class tickets for FIVE seats in coach.)

The interesting footnote, as you might know, is that Barstow the elder put together a 34-minute 31-second documentary of the whole story in 1995 (and devotes the first six minutes or so to the family’s Scotch Tape contest shenanigans – see the film here).

In 2008, the Library of Congress selected the film, titled Disneyland Dream, for special preservation. How’s that for user-generated content?

And here’s something you don’t see with today’s contests. To enter, you had to submit proof of purchase of a roll of tape. Multiply the Barstow’s SIX rolls by the alleged million entrants (0.6% of U.S. population at the time), and you’ve got some real “social media ROI.”

One wonders about little Danny now, perhaps a grandfather. And about Danny III. No doubt wailing away at his iPad all day, entering dopey contests left and right.

Or, just maybe, Grandpa makes him do it old school.

Marketing Analytics: The Stuff In Between

Judging by the nearly infinite number of articles about “attribution” recently, we’d say marketing analytics “thought leaders” are on a crusade. Their intent is to move marketers away from the easy focus on first-order metrics like banner clicks and email open rates, and focus them at the other end of the spectrum – on the “sales” that marketing can (hopefully) take credit for.

This is a bit misguided. And, frankly, becoming very boring and nearly unreadable. As an example, here is an excerpt from a recent MediaPost “Metrics Insider” column:

“On a basic level, attribution produces reports with data containing insights at a single dimension, such as channel “A” is contributing X% to your success, compared to channel “B” at Y% and channel “C” at Z%.”

That is at a “basic level,” mind you.

Missing in this discussion is what Lairig Marketing calls, technically, “the stuff in between.”

Here is an example, using a financial advisory firm for illustration.

Let’s assume the “sales” end of the advisor’s marketing cycle is a face-to-face meeting where a customer signs up for a $250 financial plan. Prior to that is an initial meeting with the advisor, where the only goal is to press for the second meeting.

Prior to that is a series of touches with calls to action that push the prospect forward. In reverse order from meeting #1 might be these marketing tactics: a download of a sample financial plan, which was driven by interaction with an asset allocation calculator on the firm’s website, which was driven by an email to the prospect, which was driven by a webinar in which the prospect’s email address was registered.

This is “the stuff in between” – planned marketing touches that can be measured precisely, to determine where improvements are needed to increase individual response rates and send more prospects to the next step…ultimately increasing the number of people who show up at the second, final meeting.

It can also inspire the addition of MORE stuff in between: “What if we sent a letter to the prospect confirming the appointment for the second meeting, throwing in a $15 Starbucks card to minimize cancellations?”

Instead of all this hard work, the “analytics attributors” believe they can automate data collection and analysis, and as a bonus, optimize the digital touch points (only). Ergo – they can prove that last month’s online banner campaign with a 0.09% click-through generated $24,550 in sales.

Oddly, that attribution effort results in more, not less, focus on clicks.

And all that “stuff in between”? Attribution pretty much leaves it as a big, black, unattributable box.

SocialCode Fans On Facebook Fan Value

Had another post in mind this morning, but a link drew me away, like a moth to a flame. I cannot resist the temptation of an article that claims to reveal – finally, ONCE AND FOR ALL – the value of a Facebook fan.

I read these for the humor. I was not disappointed when I clicked over to an article titled “Why Brands Still Need Facebook Fans.” As if anyone has been saying they didn’t.

The subtitle was even better: “Fans Are 291% More Likely to Engage With Brand [sic] Than Non-Fans.” To that I say: f*cking duh.

The article was based on analysis by SocialCode, a Facebook-only social media agency. I would put several of the words in that prior sentence in quotation marks, but then I would be guilty of writing like Stuart Elliott.

SocialCode tracked ads on Facebook over several months and divided users who responded into two categories: (1) users who were already a Facebook fan of the brand that was in the ad, and (2) users who weren’t.

As you might expect, fans clicked more often than nonfans. However, because the response rate was so much worse for nonfans, their cost-per-acquisition (CPA) was much higher (roughly $15, versus a $5 CPA for existing fans).

Net of the study should have been: “It costs $10 more to get a nonfan to respond to an ad on Facebook than it does to get a fan.”

But no, the article says this: “SocialCode is the latest firm to try to calculate the value of a Facebook fan as part of a new study. Their verdict: about $10 per fan…"

Since SocialCode HASN’T PUBLISHED ITS OWN STUDY ON ITS OWN WEBSITE as reference, it is unclear if that verdict is theirs or the author of the article – Ad Age’s Cotton Delo.

In any case, the “verdict” is bullshit, but will run through Twitterville like fire. What a shame. A sham.

This is value measured by a lesser-of-two-evil-costs approach. Since fans cost $10 less a head to acquire, then their value is $10? Nonsense. Value must be measured in terms of return – revenue, sales, operating income. There is none of that in this study.

While we are at it, here are some other interesting points to consider in SocialCode’s analysis:

1) Why would I need to spend a penny to get Facebook fans to do anything? Isn’t that the whole point of having fans – to deepen the engagement and relationship right there on the Facebook brand page? What is the point of spending money ON ADS to acquire someone I already acquired? From this perspective, the “value” of a fan is negative $5. Money eating itself.

2) Of the seven types of calls-to-action that SocialCode tracked, the one that received by far the lowest response (a paltry 2%) was “program sign-up.” Isn’t it interesting that the activity requiring the most commitment and providing the deepest engagement opportunity had the worst response?

As interesting as the conclusion that no one really gives a sh*t about meaningful analysis anymore.