Futuristic Play by Andrew Chen

Poll results from "How would you launch a new product?"

I had previously posted a poll for the folks reading this blog to vote on a poll for how they'd launch a new product, and here were the results (as of this afternoon), ranked in order:

How do you launch a new product or service?

1. Start with a site, then add app(s) later 56% (102 votes)
2. Start with app(s), then add a site later 21% (38 votes)
3. Destination site only 10% (19 votes)
4. Social network app(s) only 8% (14 votes)

There were also a couple votes for "Other" which, from the comments and emails, seemed to be people who launched with both at the same time, or people looking at iPhone development, etc.

Frankly, I'm surprised by the results!

I really expected that there would be more folks to be emphasizing app and widget development rather than destination sites. Another way to look at this is that 66% of the votes had you starting with a destination site first, with apps being an afterthought.

Perhaps with all the Facebook and OpenSocial excitement that I'm exposed to in the Bay Area, it's easy to perceive that *everyone* is working on apps when in fact there are many more traditional approaches out there.

Most ungoogley product ever from Google?

Google Launches Virtual World Called Lively.

I'm actually impressed by the fact that it's so.... not Google. It seems like something a media company would be more likely to make, not a product made by a company of PhDs. Maybe it's all those Yahoo refugees that are working there now?

UPDATE: Some more details from this informative article from Venturebeat. The product was created by one of the early founders of IMVU, and is much more directly positioned against that company than SecondLife. It's built mostly as super-rich chat, has a focus on conversations rather than walking around a world, etc.

From analog dollars to digital pennies: The crisis in traditional media

How the core competencies of distribution-focused media companies are different than digital media websites
In this blog post, I'm going to discuss some random thoughts on about the evolution of media - I've recently been inspired by the conversations going on about the difficulties of transitioning from traditional media to the digital world. I thought I'd write down a couple notes on the media landscape and the idea that the skillsets of "pipes" companies - businesses that thrive on dominating distribution - are at a fundamental disadvantage relative to web businesses that promote interactive experiences.

Let's get started with a rather famous person these days...

Miley Cyrus dominates because Disney dominates distribution (but for how long?)
For those that don't follow the celebrity gossip blog as closely as I do, the girl above (who was born in 1992, which makes me feel old), is Miley Cyrus aka Hannah Montana. The Wikipedia article on her states:

Miley Ray Cyrus is an American child actress, singer, and songwriter. She is known for starring as Miley Stewart, "Hannah Montana" on the Disney Channel series Hannah Montana. Cyrus became an overnight sensation after Hannah Montana debuted in March 2006.

Following the success of the show, in October 2006, a soundtrack CD was released in which she sang eight songs from the show. In December 2007, she was ranked #17 in the list of Forbes Top twenty earners under 25 with an annual earning of US$3.5 million.

What do Miley Cyrus, Britney Spears, Justin Timberlake, Christina Aguilera, Shia LaBeouf, Hillary Duff, Keri Russell, and the cast of High School Musical have in common? I mean, other than having ridiculous "pop" careers? Well, they were all, at some point, part of the Disney marketing machine that takes in normal kids and spits out billion dollar franchises.

And when you want to understand how this marketing machine works, you have to look at how all-encompassing the Walt Disney Company really is - here are the companies that all fall under the Disney umbrella:

ABC, ABC Family, ABC Kids, Walt Disney Distribution, Walt Disney Motion Pictures Group, Disney Channel, ESPN, Jetix, Walt Disney Studios, Walt Disney Parks and Resorts, Walt Disney Television Animation, Walt Disney Records, Walt Disney Pictures, Touchstone Pictures, Miramax Films, ABC Studios, Playhouse Disney, Disney Consumer Products, Pixar, Soapnet, Disney Interactive Studios, Muppets Holding Company, Disney Store, Toon Disney,  New Horizon Interactive, Hollywood Records

And with 137,000 employees and >$35B in yearly revenue - well, if you want to make a little girl like Miley Cyrus famous, turns out you can!

Media consolidation and vertical integration go hand in hand
The point is, Disney and the many companies that would be considered its peers (Viacom, Fox, Sony, Vivendi, and the like) own the entire value chain from start to end in traditional media. In the "content is king" model, the focus is on producing content, but then owning the marketing, the distribution, and everything in between.

Does it surprise you that Time Warner both makes movies, and publications that promote movies, as well as a cable company that can distribute them on-demand? Or that one of the driving forces for Rupert Murdoch to buy MySpace was to use it to promote its movies, as discussed in this informative article in Hollywood Reporter? The saying, "content is king" means that when you're the only game in town, you're able to use your considerable cross-channel leverage to boost whatever you want and make it popular.

The problem is, where does that leave the customer?

If media companies are ultimately "pipes" companies - ones that primarily focus on distribution - what is their incentive to serve the consumer? I think that in the tech world, when we've seen this happen with Microsoft when it achieved superior distribution leverage relative to all its competitors. It creates perverse incentives to to try to squeeze whatever you can out of consumers, rather than innovating new products to serve them. And I'd argue that a lot of what we see in the entertainment industry - endless sequels, manufactured pop bands, child-actor-to-paparazzi-bait actresses - are all indicators that this is already happening. Why take content risk when you can just out-distribute and out-promote whatever you want?

Is the Mummy 3 the entertainment equivalent of Windows Vista? (I guess I shouldn't be too harsh, after all the movie hasn't released and I haven't seen it yet - maybe it will be good!)

How vertical integration weakens with the internet
Of course, this vertical integration strategy starts to fall apart when you're talking about digital content on the internet. The reason is that it's hard to dominate it in the way that you can dominate offline distribution. It's hard to be the only game in town. When the game is to own cable wiring, satellites, movie theaters, radio towers, and all that jazz, then the big guys have a natural advantage - scale is rewarded, and the bigger you are, the easier it is to own a bunch of infrastructure and operate it efficiently.

But on the internet:

• Anyone can set up a website
• It's easy to copy, pirate, and otherwise separate your content from your distribution mechanisms
• With the advent of UGC, the engagement around media is also being captured off branded media sites as well
• Passionate vertical web communities are more engaged and can serve their specific audience better
• ... and any entrepreneur with a couple hundred grand might end up with a website bigger than anything the old-school media companies can put together

So if you assume, at runrate, that any media you release will quickly (and virally) spread itself across the world, with or without your approval, and that people are likely to watch it at destinations you don't own, then the traditional model starts to break. Things that you don't expect to take off suddenly do, and the well-orchestrated launch of a "official" website for content might fall flat on its face. The problem is that the traditional source of power for media companies, the vertically integrated apparatus of content, marketing, and distribution becomes broken up into little pieces on the internet.

To this, I make the observation:

With the distribution efficiency of the internet, it becomes harder to control your consumers, and that's a good thing :-)

So let's talk about what companies might succeed in this new world...

The core competencies needed to succeed in digital media
If content becomes increasingly commoditized, and fragmented among many distribution vehicles, then what happens next? I'd argue that the new skills required to succeed in this era are NOT:

• Understanding how to best own/operate pipes, like cable systems, satellites, radio towers, etc
• Strong-arming partners and distribution to lock content into place
• Finding media synergies to cross-promote content and "make" hits

Instead, I'd argue that the new skillsets will be around serving the consumer, not pushing them. This means that media companies will need to grok:

• The economics of syndication and monetizing content off of "branded" media destinations
• Search, browse, and other aggregations of media content
• Personalization, recommendation, and social filtering

Will the traditional media companies make the leap? Or will they retreat into content, letting new players own the distribution layer? That seems to be what's happening with YouTube, iTunes, and other strong players in the digital distribution world. The jump from controlling consumers versus serving them may be too big for these companies to make, but only time will tell.

Suggestions and comments welcome!

What are you really trying to measure?

I hugely enjoyed Fred Wilson's blog this morning, where he discussed Three Statistics That Lie. In particular, he singles out:

- RSS subscriber numbers
- Facebook app install numbers

- Follower numbers on Twitter, Friendfeed, Tumblr, or some other social media service.

He points out the fact that RSS numbers show subscribers, but this number never goes down even though some people never actually read your blog - they just subscribed eons ago. Same with Facebook apps, and Twitter followers.

The point is, what are you really trying to measure?

In the Facebook case, the reason why "installs" feels like it's not a great metric is that ultimately, value is generated by revenue, which is generated by ad impressions and CPMs, which are ultimately generated by active users. And active users obviously correlate with total installs, but it's not a great correlation depending on how old the app is.

I would even break those active users down to users you can expect to retain, versus people you're just dumping in and don't expect to see again. (For example, RockYou's Super Wall app recently had its viral channels taken away, and it showed that only 30% of the users were "retained" users versus people who come back because of notifications and such)

Anyway, numbers are numbers and they are meaningless if they're measuring the wrong thing. So start with the business questions, which likely revolve around value generated as defined by an engaged audience that comes back and the revenue they throw off, and begin your model from there.

Trying out the new Amazon Recommendations widget

I recently read about Amazon's new recommendation widget and I'd try it out. I think it's another neat example of why even though Amazon's business is almost all retail, they are really more of a technology company at heart.

Anyway, an example of the widget should show up here:

... and I also stuck it on the right side of this blog. (Obviously not helpful at all for the majority of my audience which I'd guess use RSS readers or email to follow my posts)

In general I've found that the Google ads on my site absolutely don't monetize at all - no surprise there :) Let's see how these do.

Obama and McCain: How political marketing has evolved from offline to online

What?? A political post?
I've never blogged about politics before, and I'm not going to start :) This post is 100% about the evolution of marketing in the world of politics, not about any political positions. Anyway, I'm compelled by the fact that I've been encountering article after article about Obama's mastery of the internet, and before that Howard Dean's.

In particular, there was a great article in The Atlantic Monthly called The Amazing Money Machine with the subtitle "How Silicon Valley made Barack Obama this year’s hottest start-up." In it, there are some great passages on how the Obama campaign has used technology to their advantage:

To understand how Obama’s war chest has grown so rapidly, it helps to think of his Web site as an extension of the social-networking boom that has consumed Silicon Valley over the past few years. The purpose of social networking is to connect friends and share information, its animating idea being that people will do this more readily and comfortably when the information comes to them from a friend rather than from a newspaper or expert or similarly distant authority they don’t know and trust. The success of social-networking sites like Facebook and MySpace and, later, professional networking sites like LinkedIn all but ensured that someday the concept would find its way into campaigning. A precursor, Meetup.com, helped supporters of Howard Dean organize gatherings during the last Democratic primary season, but compared with today’s sites, it was a blunt instrument.

And of course, you can't forget Obama Girl, who now has 8.8 million views, or the Obama Facebook group which has over a million supporters now. Overall, pretty amazing stuff.

But as I mentioned above, this isn't the first time that the Internet played a role in politics, since the Howard Dean supporters aggressively used services like Meetup and the MoveOn website to organize their efforts. Here's an article from Wired magazine in 2004 describing the Howard Dean run.

Republicans and their direct mail expertise
Of course, back in 2004, another big story that played was the mastery the Republicans showed of direct marketing, particularly by Karl Rove who previously spent many years in that industry. In another article from The Atlantic, called Karl Rove in a Corner, there are some choice passages on how he thinks about targeting and direct marketing:

When Rove arrived in Alabama, in 1994, his clients were initially puzzled as to why he was having them campaign in rural and less populated parts of the state rather than the urban areas they were accustomed to. It turned out that he had run an electoral regression analysis on each of the state's sixty-seven counties, and for efficiency's sake he put his four judicial candidates together on a bus trip to the counties with the highest percentage of ticket-splitters. "Karl got us focused on the fact that it was a matter of convincing Democratic voters who were already conservative to vote for Republican candidates," Mark Montiel, a candidate on the trip, explains, "because that was who best expressed their views."

... snip ...

As with direct mail, Rove was skilled at reaching specific voter segments with television commercials, buying air time only during programs that he believed would attract the audience he was trying to reach. In his Alabama races he was known particularly to withhold advertising from The Oprah Winfrey Show and similar afternoon programming—"trimming a media buy," as it is known in the trade. Bill Smith, who worked on a series of close races with Rove in Alabama, says, "There's a real overlap in what he specialized in professionally and what you need to do in a tight race." Whether he is seeking donors in a direct-mail fundraising campaign or manipulating a particular demographic sliver to win a close race, Rove's professional goal has been strikingly consistent: to reach the right people.

There's also another great article on the attempts for Mitt Romney, a Harvard Business School grad, to do this for his (ultimately failed) presidential campaign in the Post covered here. The point is, they were very smart about the process of collecting a vast database of data, using advanced marketing techniques like cluster analysis, machine-learning segmentation, regression analysis, etc. This is good stuff!

That said, in almost every article I've read about the subject, the focus of the Republicans seems emphasize direct mail - perhaps that's a better vehicle for their demographic, or perhaps because that's just the skillset they have developed over the last 10 years. However, there's many studies about the efficiency of internet advertising versus offline, and politics is no exception - let's take a deeper look at this:

Comparing direct mail to internet
There's some interesting numbers comparing direct mail and internet-based donations in an article from the American Enterprise Institute, which states:

It is not just that he has built this veritable army of contributors, most of whom will follow with him through the fall campaign and beyond, if he is able to win the White House. Having this base of small donors through a process that is incredibly inexpensive to run, with fundraising costs that are 5 to 10 cents on the dollar (compared with 95 cents for direct mail), frees Obama from the punishing, time-consuming burden of attending scores of fundraisers and making thousands of phone calls to potential donors. (Of course, Obama is not at the same time ignoring the $2,300 donors and bundlers, which may create more flak for him through the rest of the campaign. But he will certainly spend much less of his own time courting donors than will McCain.)

(I bolded the sentence above). Wow! 5-10 cents on the dollar versus 95 cents for direct mail - what an amazing statistic. If you believe that, then it means you are almost 20X more efficient with internet marketing than direct mail, which is a huge number.

I'm not following the political campaigns that closely, but I'd be interested in a couple broad questions about how the approaches of the two parties are shaking out, from a macro-perspective:

• First off, are the Republicans majorly lagging in their ability to use the internet as a political vehicle?
• Similarly, do marketing channels like broadcast media and direct mail - which are "push" - fundamentally different than interactive media, like Facebook apps, YouTube UGC, etc.
• Can the same techniques that Rove used back in 2004 be re-applied to the internet? Is the DNA there, and it's just a matter of time before the GOP cracks the nut for online marketing as well?
• For online marketing in politics, how quantitative are the approaches right now? Or is the offline-to-online opportunity so ripe that the qualitative stuff works without much thought?

Anyway, if anyone has any opinions or insight onto this, I'd be very interested to know. Comments and suggestions always welcome!

25 reasons users STOP using your product: An analysis of customer lifecycle

Churn from a customer lifecycle perspective
As much as I blog about viral marketing, it can't be avoided that having healthy product retention is an equally (and incredibly) important part about having a successful product. Thus, in addition to talking about the issues around user acquisition, a similar discussion must be had around user churn.

In the customer lifecycle perspective, you look at the product from the perspective of a user that has a series of experiences starting from newbie and going into an advanced role. In addition to looking at the success cases, looking at the failure cases is informative too - you want to analyze your product for potential exit points and relate them to both quantitative and qualitative measures. More on the customer lifecycle concept here, by Josh Kopelman at First Round Capital.

Anyway, here's a good example of this from the games industry: At the Austin Game Developers conference last year, there was a great presentation on why players leave their MMOGs from Damion Schubert (who also writes a mean blog here). There's a very convenient writeup of his talk at Massively, which includes the following list:

I'd encourage reading it in full. Obviously, the challenges that face more web-like products are very different, yet the same approach can be used.

Customer lifecycle within a social product
I imagine that many in the readership are working on social products - for any product in this space, you often have a number of fuzzy stages that a user can move through during their lifecycle. This may include stages like:

• First experience
• Soloing and single user value
• Encountering some friends(?)
• Hitting critical mass for social
• Becoming a site elder

Obviously every product is different, but the rough idea should hold for every social product out there. Early on, the initial experience is all about whether or not the user sees value in the product, and whether or not it "looks okay." Then, oftentimes the users won't have enough friends to make the site useful, in which case they fall back on a solo experience. Once they start hitting some other folks on the site, and making friends, then if done correctly, the site will hit critical mass and things will be sticky. And finally, in some products, some % of these users will turn into mods or admins or otherwise be elders within the product.

25 exit points
Now let's look at all the different reasons why people might leave at any point - and obviously, the retention gets stickier and stickier in each stage, so perhaps reasons like "the site is too addictive!" become less effective :)

Anyway, there they are:

• First experience

"I don't get what this site is about"

"This site is not for people like me"

"The colors/design/icons look weird"

"I already use X for that"

"I don't want to register"

• Soloing and single user value

"I don't have time to get involved in a site like this"

"I'm lonely, not enough happens"

"I forgot my password"

"I don't know how to talk or meet people"

"I'll just check on this account every couple months in case something happens"

• Encountering some friends(?)

"People on this site are mean"

"People I don't know keep messaging me, WTF?"

"I want my friends to use this, but none of them are sticking"

"I'm getting too much mail from this site"

"I only have 3 friends, this site is still boring"

• Hitting critical mass for social

"This site takes up too much of my time"

"Too many people are friending me that I only sorta know"

"People are stalking me based on my pics and events!"

"This Top Friends thing causes too much drama"

"I'm getting flooded by e-mails for everything that anybody does"

• Becoming a site elder

"The guys who run this site aren't building feature X that we really need!"

"The guys who run this site build feature Y that's going to destroy this site!"

"I'm doing a lot of work but I'm not getting anything for it"

"I'm bored because there's nothing left to do"

"Newbies are fun to pick on :)" (wait, maybe that's a benefit!)

Obviously, this is just a quick brainstorm of a list, but the point is, the reasons why people churn is often very different depending on their lifecycle. And some of the best things you can do for your product, in terms of retention, are things that are very positive for newbies, but might have side-effects elsewhere. You always want to balance each of these things off, depending on your product and business goals.

Am I missing anything else obvious? Comments and suggestions are always welcome!

Companies reading Futuristic Play - advertising, games, media, and more

One of the more unfortunate things about writing a blog focused on long-form essays that are not easily discussable is that you don't get a ton of information about your audience just from comments and e-mail dialog. Through limited methods, I have some very rough visibility from what I can put together based on referrer logs, subscribed email addresses, and other sources.

Anyway, here's a meta-blog post, in tradition with previous ones on top referrers, subscriber boosts from Scoble, and others, I wanted to share a short collection of the wonderful audience I'm very grateful to have reading this blog.

It's pretty amazing to see how wide and interdisciplinary the audience is - there's a ton of folks from super-consumery publishers/games, but also advertising and finance folks.

Here's a selection of the companies that caught my eye:

Advertising and B2B:

• Aster Data Systems
• Medio Systems
• Revenue Science
• Tacoda
• Right Media
• Publicis Groupe
• ... and a bunch of ad networks

Games and entertainment

• Electronic Arts
• Linden Lab
• NCSoft
• Sulake
• ... and numerous startups like IMVU, Gaia, AreaE, and Weeworld

Media

• Joost
• Yahoo
  
• Virgin
• Google
• Slide
  
• Facebook
  
• MTV
• Hi5
• Tagged
• ... and tons of Facebook developers and apps

Finance

• Lazard Freres
• Elevation Partners
• Mohr Davidow Ventures
• Blue Run Ventures
• Sierra Ventures
• Bessemer Venture Partners

Sorry if I'm missing anyone - I have a lot of empty referrer URLs, personal gmail/hotmail/yahoo addresses, and many other untraceable sources :)

Anyway, thanks to everyone for reading!

Poll: How do you launch a new product or service?

(If you're viewing this in an RSS reader, you have to view the actual blog to see the poll below)

Craigslist to surpass eBay in 2009? Compete and Quantcast seem to think so...

At the Structure '08 conference, one of the eBay guys made the comment that scalability was a solved problem for them. A fellow conference goer observed:

airplanedan: must be nice to be ebay... James Barrese says they have scaling figured out and never have to worry about it again #structure08

This comment made me curious... Growth obviously makes scalability really hard, and how much is eBay growing anyway?? After pulling up a couple charges, in particular comparing things to Craigslist, you see some interesting results.

According to Compete, Craigslist has grown 76% in the last year while eBay has declined 11.6%:

If that pace continues - and your high schools stats warned you about the dangers of extrapolating- then Craigslist will pass eBay within the year. Wow! That would be big.

That means Craigslist will not only be the bane of all the old media newspapers, but also a former dotcom darling.

Here's the Quantcast graph for another datapoint: