Web 2.0 Marketing 101

Earlier this month I gave a webinar on the fundamentals of online, social, and Web 2.0 marketing to a group in Texas. The client wanted the basics for an audience who was hearing the buzz about the potential of Web 2.0 but had operated primarily in the offline sphere until now. They wanted pointers on how to get started and where to focus initial efforts.

Increasingly, I'm running into organizations in this situation, as the Web 2.0 mentality trickles into the mainstream. It's exciting to see so much interest in these strategies and tactics. The Obama campaign's high-profile use of social marketing to organize and raise money attracted lots of attention.

Ultimately Web 2.0 will drive profound structural changes in the media, advertising, marketing, and PR industries. Old barriers and hierarchies will fall and new opportunities will emerge. It will take awhile to overcome the inertia of the status quo, but every company that adopts a Web 2.0 approach moves all of us a step closer to the new order.

Meanwhile, a lot of businesses are looking for help taking those first steps. My presentation was very basic, but not everyone lives and breathes Web 2.0 the way we do in Silicon Valley. If you want to review fundamentals or know someone who does, here are the slides:

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View SlideShare presentation. (tags: social marketing)

Lessons Learned from Bacon Salt

One question a lot of people are asking is how to use Web 2.0, social marketing, and the elusive phenomenon of viral growth to enhance conventional online marketing and brand-building strategies such as SEO/SEM and email marketing. I recently came across a blog post that details how one improbable brand's Web 2.0 efforts helped build a groundswell of awareness and trial that led to getting scarce shelf space in crowded retail chains. The brand is Bacon Salt, a humble food product with the seductive premise that "everything should taste like bacon."

It turns out that Bacon Salt was the brainchild of a couple of internet guys whose marketing instincts naturally gravitated to the web. They set up a web site and blog for their product, put it on YouTube, created Bacon Salt groups in MySpace and Facebook, promoted it on Twitter, and of course, sold it online. They didn't have much money, which dovetailed well with the web-based approach; online, many of the best strategies are free.

Within three months Bacon Salt was gaining significant buzz, including a mention in The New Yorker. Users began requesting it in local supermarkets; soon it claimed coveted shelfspace in major grocery chains.

The Bacon Salt story is a Web 2.0 marketing primer. If you're eager to rev up your online marketing efforts, start with the Bacon Salt checklist. Watch your analytics closely to see what works best in your market; that's where to focus followon efforts.

Want to learn more? Read details on the genesis of the Bacon Salt brand here; check out the Bacon Salt website; and follow the official Bacon Salt blog.

Putting YouTube to Work

I'm often asked how to integrate Web 2.0 opportunities such as YouTube into marketing programs. YouTube is a tantalizing distribution channel, reaching millions around the world. But it's also an unruly universe of user-generated content that's hard to steer in a specific direction, and the highly diverse audience requires further segmentation to deliver much value. Making the most of YouTube and its Web 2.0 peers is a tough challenge, but one that marketers must solve to capitalize on the opportunities offered by today's technology.

I recently came across a great advertising campaign that camps onto the YouTube phenomenon in some smart ways. It's a good case history in marketing via web 2.0.

Last year Freixenet, the Spanish sparkling wine manufacturer, working with mega ad agency JWT, hired renowned film director Martin Scorsese to make a nine-minute commercial couched as a film within a film. Titled "The Key to Reserva," it's an homage to/spoof of Alfred Hitchcock movies. Scorsese worked with friends on the project and seems to be having fun...plus he was no doubt well paid. In any case, one of the things that makes the concept work so well on YouTube is an exclusivity that closely maps to Freixenet's target demographic. People who would gravitate toward a Scorsese/Hitchcock video are an urbane lot who may well enjoy sparkling wine. It's a lot easier to extract needles from the haystack with a powerful magnet.

Note that Freixenet could have make the same investment in another top director, say Steven Spielberg, who might have drawn an even larger YouTube following. But quantity could come at the price of quality, with viewers who were unlikely to buy Freixenet while potential customers stayed on the sidelines, not sufficiently motivated to watch the film. A tight match between content and audience is essential to uncovering value in the YouTube distribution channel.

Freixenet and JWT did some other things right. Viewers remain engaged with the brand for more than nine minutes, a huge amount of time compared to conventional 30- or 60-second spots. The choice of a suspenseful Hitchcock-like format almost guarantees the audience will remain glued to their monitors for the full run time. The film doesn't feel like a commercial; the Freixenet brand is mentioned but downplayed until the end. The "Hitchcock" portions are full of rich details that satisfy even the most avid Hitchcock buff. And YouTube's social focus makes it easy to share the video with friends who have similar tastes, driving the "virality" so highly prized by online marketers.

Bottom line, it's easy to label a splashy marketing effort like "The Key to Reserva" as a stunt, but in this case it's an example online marketers can learn from. New media require new methods. As Alex Martinez, an executive at JWT Spain who worked on the project, put it: "We wanted to produce something that would be pure entertainment, something that was true to our philosophy that it's not enough now to 'buy' audience time--we need to create advertising that the audience chooses to spend time with."

Kudos to Freixenet and JWT for some creative ideas that expand our thinking about new ways to reach audiences and build brands in the world of Web 2.0. And now, have a look at "The Key to Reserva":

How to Survive the Financial Panic: Sequoia Capital's Take

Those of us in the web 2.0 universe are eager to write history, but not the sort that's currently going down (yes, take that literally) in the financial markets. What's an early stage/high growth business to do? If you haven't yet seen the slides proliferating around the web, check out Sequoia Capital's analysis of the panic and advice to portfolio companies. Slide 49 sums it up: the VCs believe this is the time to slash expenses. Since they're often the ones funding the spending, there will likely be less cash in the pipeline for some time to come.

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Most of the companies I've been working with have been tightening their belts all year, but now is the time to get really serious about fundamentals. Be extra selective about hires. There's lots of talent on the market now, and the smartest, most creative and proactive among them can fill the shoes of two or three ordinary employees. There couldn't be a better time to add a top-notch online marketer to the team. This needs to be someone who has specifically leveraged the online medium and metrics to increase awareness, traffic, engagement, and revenue, and build a brand. Someone with a top online marketing skillset will have a bag full of low cost ways to help your business grow, just when you need it most.

Now is also the time to sharpen the focus on ROI. In the current environment, ROI must be a litmus test for any proposal that requires resources. From the executive perspective, there's never been a more important time to set clear priorities for the company and communicate them throughout the organization. Ideas, perks, pet projects, etc., that don't survive the triage exercise can't chip away at the scarce resources needed to keep the business afloat.

In the end it's about getting back to basics: know why your idea warrants the overhead of its own company, how your product(s) differ from the competition, who your audience/customers are, how you will create enough value for them that they will fund your operations with a robust revenue stream, and how to manage the company in a way that minimizes costs and maximizes profit. They're Business 101-type questions, but sometimes it takes a jolt to bring them back top-of-mind. October 2008 has provided one of Wall Street's periodic wakeup calls.

PS - Speaking of online marketing, note Sequoia Capital's use of the web 2.0 site Slideshare to distribute their information. It's just one of many sites that facilitates tapping into the networking and viral power of the web for the heavy lifting to get the word out about your company, services, brand, etc.

Back from China

Just back from China, a place I love to visit because the quotient of innovation and social and cultural change is so high. Even as the US is having one of our periodic economic meltdowns, the average Chinese man in the street seems more prosperous, confident, and optimistic than when I visited only last year. There are many clouds to this silver lining; still, it's a fascinating laboratory for moving the needle on a massive scale.

Whenever I'm in China I enjoy making photos wherever I go. Maybe it's my attempt to freeze a few moments in a land where so many things these days are shockingly ephemeral. In any case, a favorite picture from this trip is a woman entrepreneur in Kunming (click photo to enlarge). She's a classic study in what it takes to build a winning brand, including innovation, confidence, a unique sense of style, creative problem solving, differentiation from the competition, and a product that raises the bar. All of us working to build value for companies could take a few lessons from this savvy lady.

Back in October

The blog has been on summer break and now I'm off to China for the rest of the month. I'll be back in October with an update from Asia and more posts, coming soon.

What a Difference a Day Makes!

I didn't need Dinah Washington to remind me that in "24 little hours" I went from leading-edge cool yesterday to has-been this morning, thanks to the release of the eagerly awaited new 3G iPhone. Luckily the new iPhone 2.0 operating system, also available today, works on old phones like mine and adds significant functionality even to the "vintage" models. The excitement is so high that many people looking to upgrade old phones haven't been able to connect to the iTunes store where the software is available.

After trying unsuccessfully for about an hour I started searching for options and came across a Macworld article that provides a link you can use to download the software directly, then you "restore" your iPhone to the new settings. It's a bit complex; be sure to read through the comments for specific instructions. I had to restore twice--not sure if that's part of the process or if there was just a glitch, but in any case it worked for me and I've been exploring some of the third-party applications on offer in the new App Store.

There are a number of mobile media apps--for now, most free to download and without advertising. The NY Times and Associated Press both offer iPhone-specific news apps. They're both useful; the one from the Times has a more polished interface while AP's offering allows you to set a location (no automatic detection) for local news. Bloomberg has a very nice financially oriented news app. There are several location-based apps that seem ready to plug into location-based advertising. The Google app also collects location up-front; can mobile ads be far behind? I like NowLocal's concept: they automatically detect your location and provide the latest news in your vicinity. Another interesting app is a citizen journalism effort from Fox News, UReport, which encourages iPhone owners to send breaking news photos directly to the local Fox outlet. And there's a personalizable mobile portal from Pocket Express. In all there are over a dozen apps so far in the App Store's News category.

There are more than a dozen radio-related apps. For example, AOL radio (which is free) brings 150 CBS radio stations and more to your iPhone. There are many audio apps, for example, Jott for iPhone, which promises voice-to-text (speak to the phone and it stores your message as a text memo) as well as a host of "talking phrasebooks" that range from free to about $10. On the content creation side, for bloggers who use TypePad there's a handy app with that service. NewsGator has a free RSS reader, NewsNetWire, or you can buy iRSS for $5, but I prefer my generic mobile reader from PressDisplay. There are a number of video apps as well.

For long-form reading you can download an e-reader, with options ranging from free to $10, or directly buy classic (copyright free) novels for a dollar or two apiece.

The only app I've noticed so far that integrates advertising is the free version of Twitterrific, a third-party Twitter client. If you don't like ads you can pay $10 for essentially the same service ad-free.

I'm only beginning to crack the surface...you can guess how I'll spend the weekend! But it's already clear that the iPhone software development kit has provided a huge boost to mobile media. The utility is here now; more coherent monetization won't be far behind. Many applications are free today in order to judge unfettered demand and determine the optimal business strategy: sales (low demand) or advertising (high demand). Keep an eye on: how things that are free now get monetized; how ads are integrated into the experience; and how audio and location are integrated with content and services. The fun is just starting!

"Yanked by Yelp": When Social Media Goes Bad

In retrospect it seems inevitable: email spawned spam; search engines engendered "black hat" SEO, now it's time for Spam 2.0, when spam enters the domain of user-generated content. An article last week in the San Francisco Chronicle tells the story: a network of mutual back-scratchers--primarily small businesses--exchanged favorable reviews on the locally powerful Yelp review site. When Yelp discovered the spam scam it deleted most of the offenders' reviews, prompting outrage and talk of a class-action lawsuit from those "yanked by Yelp."

Yelp defends the decision as vital to protecting the integrity of the brand, much as major search engines must be diligent about demoting or purging irrelevant or falsely inflated links. Companies hosting email and search services spend significant resources trying (not entirely successfully) to purge spam. The Yelp case gives notice to Web 2.0 businesses that it's their turn now to mount big cleanup efforts. Chances are that, as with other forms of spam, Spam 2.0 will remain a fixture on these sites for the foreseeable future. Spammers will get smarter and the effort required to keep them at bay will only increase. Over the longer term, Spam 2.0 will be a bigger problem for social media than current headaches such as inappropriate content or language.

Perversely, the rise of Spam 2.0 is a positive indicator for Web 2.0. Spam only afflicts the largest and most successful web apps with the greatest commercial potential: email, search...you see the pattern. The rise of social spam is a strong rebuttal to doubts about the popularity, credibility, sustainability, growth prospects, and revenue opportunities of community-oriented Web 2.0 models.

Yelp took the right approach: they acknowledged companies' need for a role in the conversation and started Yelp for Business Owners, which encourages owners to "claim" their businesses on the site, communicate openly through a structured channel, and use customer comments to improve operations instead of being too quick to refute negative information. The good guys will be glad for the opportunity; but Spam 2.0 is probably here to stay.

Feed Readers Evolve

It's been a few years since there was much exciting news around feed readers--software that allows users to collect and display content feeds in formats such as RSS and Atom. One early leader in the technology, Pluck, even shut down their reader product in January 2007 in order to refocus the business on social media. Nevertheless, newsreaders are an interesting concept with the potential to dramatically shift control from publishers to users, once again underscoring the democratic nature of the web.

Some recent innovations are starting to make the newsreader space interesting again by finding alternatives to the uninviting unstructured, text-centric approach that characterized these products in the early days. A few examples:

MSNBC's Spectra: This beta product blows the doors off the visually boring scroll of text that had become synonymous with feed readers or, as MSNBC's marketers put it, "merges the news spectrum and the color spectrum." Surprise, the colorful, animated interface turns out to be functional as well as fun. News categories are color-coded, you can save articles to read later (must be online), and there's keyword search. A significant limit to the current product is that it's essentially a front door to the MSNBC news service; you can't add feeds from other sources. Spectra is a free and web-based.

TalkingNews: TalkingNews, also a beta, decouples the newsreader from text entirely: it uses text-to-speech technology to turn RSS and Atom feeds into simulated podcasts. You can also add your favorite podcasts to your TalkingNews reader. There are four voice options for hearing your feeds. The audio files are downloadable so, like conventional podcasts, they're available offline. TalkingNews is web-based. Basic membership, limited to two channels of two feeds each (max 60 minutes of audio per day), is free, or you can upgrade to a $19.99 annual subscription that offers ten channels of ten feeds.

PressDisplay, a Canadian company, offers a configurable viewer to organize and read news content from over 600 newspapers around the world. There's a mobile version as well as a text-to-speech option, "Newspaper Radio." You can filter content by language as well as on a spectrum from user favorites to editors' choices. You can select content from PressDisplay's many news sources, but can't add personal favorite feeds. PressDisplay is web-based, but there's a downloadable PressReader that allows offline access. There are three subscription options ranging from a limited free plan to unlimited access for $29.95 per month.

Interesting Mobile-Related Web Sites

I've been increasingly involved with mobile projects lately, as this platform rapidly matures into a full-featured medium for social interaction, information, and commerce. That's led to a couple of interesting web sites that throw light on where mobile technology is headed. If they're not already on your radar, they're worth checking out:

1) Nokia's MOSH: Nokia started this very Web 2.0 content sharing site specifically for mobile content--audio, video, text, games, software, and images. The good news: it's not limited to content for Nokia handsets; the aim is to facilitate sharing content on all mobile devices. I like the focus on content across media types, as well as the assumption that mobile is a central platform for consuming as wide a variety of content as the PC. Added to Nokia's acquisiton of Mobile OS company Symbian, the MOSH initiative makes it clear Nokia wants to provide much more than handsets in the mobile future.

2) Alcatel-Lucent's Teen Lab blog: Telecom giant Alcatel-Lucent spends a significant amount each year studying the global youth market for mobile technology, in an effort to uncover and understand important trends. The Teen Lab team summarizes findings and links to interesting related content in their official blog. In addition to the mobile-specific observations, the site is interesting for its insights into the behavior and preferences of teens, the "market of the future." Alcatel-Lucent knows research; the company is the current owner of the historic Bell Labs research facility.

How to Be the Best Web 2.0 Developer

One of the sites I blog for is my friend Silvia Bassi’s CW Connect, a community for IT and telecom professionals in Brazil. Today a computer science student in the community asked what core skills are most valuable for developers aiming to work in the Web 2.0 environment. I’m a business person, not an engineer, so I passed the question to Joe Kleinschmidt, the CTO of Leverage Software—an online community software and services company that provides the CW Connect platform.

Joe promptly sent back a thoughtful response that I’ll share here, for the benefit both of aspiring Web 2.0 developers as well as managers who are building teams to actualize Web 2.0 product or business visions.

CTO Joe Kleinschmidt’s advice for building the most valuable skillset possible for the Web 2.0 world:

“Wow, quite an interesting question! Well, because technology tends to move so quickly--today's Ruby is tomorrow's FORTRAN--I typically find it's much more important to develop skills which span across technologies. For me the most important skills fall under the following headings:

• Communication. Web 2.0 applications today are designed by interdisciplinary teams, distributed across the globe, for a set of demanding customers, in a rapidly-changing industry. Thus, the best web developers I've ever worked with are outstanding at communication--both technical and nontechnical. Technical communication is frequently visual, so I recommend developers learn how to read and write architecture diagrams, data models, object models, UML--things that tend to cross language boundaries. Of course nontechnical communication is equally important. There is no substitute for elegant writing and speaking skills to convey an idea to a customer, partner, or colleague.
• Architecture. Web 2.0 applications are all about scale. Great developers understand--at their core--how an app will work when millions of people are using it. Learning about performance, stress-testing, being able to write simple, loosely-coupled apps that can be distributed across multiple servers at multiple locations is a tremendous skill. Great developers can "see" (and avoid) bottlenecks in code right out of the gate.
• Design. Call it the iPod effect: so many products succeed wildly because they are elegantly designed and a joy to use. Some developers think that usability and design "isn't their job," but I've found that the best web developers tend to have enough of an eye to know when something "feels right." Developing that creative intuition--whether through an art class, usability seminars, or anything--means that great designers will simply find it easier to work with you, which in turn means you're more likely to work on beautiful (and successful) products."
  

Great information Joe! One other thought: it’s helpful to have some insight into the business mindset as well. A course or two in economics, finance, or marketing can open the door on how and why business goals and priorities are set (maybe there’s a reason they’re counting those beans). That can facilitate getting everyone on the same page and aligning resources, efforts, and objectives. Especially in such a fast-evolving and competitive environment as Web 2.0, the more efficient the organization, the better the odds of success.

Are there other skills we should add to the list? Leave a comment with your thoughts.

iPhone's Touch Screen Is Contagious

Detouring momentarily from business models to the UI, Microsoft just announced that its next-gen operating system, Windows 7, will be touch-screen compatible. The feature is getting top-level endorsement: CEO Steve Ballmer personally announced the future feature at the Wall Street Journal's "D: All Things Digital" conference, while Chairman Bill Gates articulated the company's vision of input beyond the keyboard: "Today almost all the interaction is keyboard-mouse. Over years to come, the role of speech, vision, ink — all of those — will be huge."

Windows 7 is slated to replace the controversial Vista in 2009. As explained in a post on the Microsoft Vista team's blog, its touch-screen capability derives from an earlier Microsoft touch initiative known as Surface.

As fans have predicted, the iPhone has kicked off the next round of UI innovations. Human-computer interactions 10 years down the road may not much resemble today's heavily text-input-centric approach, much as Windows (and of course the Apple OS that inspired it) transformed DOS. Inevitably, revolutions in interaction spawn new business models and opportunities. So far we've only scratched the surface of the potential for innovation in online media.

Bridging the Digital Divide

The Hickory Pit BBQ restaurant in Savannah, TN: wifi enabled. But it was hard to keep the sauce off the iPhone.

Peeking at the Future of Mobile

The mobile medium is one of the most exciting areas for innovation these days, as leading-edge Web 2.0 technologies and strategies (social networking, user-generated content, AJAX, widgets) start to intersect with the latest device trends, such as 24/7 availability, broadband, and location awareness. It's a complicated matrix so it's hard to guess exactly how the dynamics will play out. But some recent items in the news give interesting peeks.

At the recent Web 2.0 Expo here in San Francisco the founders of Zumobi, a mobile widget application, offered a list of six attributes required for success in the mobile space, summarized in Tom Krazit's One More Thing blog on CNET:

• Immediacy: the entire interaction with the device should occur with 15 seconds


• Adaptability: input on mobile devices is still a challenge and continues to evolve. Applications shouldn't depend on a single input method--it might become obsolete


• One-handed use: research shows that with mobile devices, people tend to create content with two hands and consume it with one hand. Mobile users consume far more content than they create, so devices should be optimized for this interaction.


• Visual elegance: devices such as the iPhone have raised the bar in terms of expectations about the visual user experience. Going forward, successful applications need to meet or exceed these standards.


• Put the user in control: Based on their experience with PCs, users are used to a certain level of control over the desktop, applications, etc. The mobile market, now dominated by carriers, doesn't offer comparable configurability, but it should.


• Thinking differently: never forget, mobile is a whole new world; quite possibly the rules that govern the web don't apply. For example, while online applications aim to be "sticky," in mobile it's ok to be "bouncy," allowing people to dip in and out of the application quickly. If your application is easy to use on the go, people will come back frequently.

The Zumobi founders, Ben Bederson and John SanGiovanni, have high praise for the iPhone as a device that points toward the future of mobile computing. As Krazit puts it, they believe the iPhone represents "the successful amalgamation and commercialization of design tidbits that had been circulating for years." The ability to synthesize existing features into a revolutionary leap forward is a key element in the process of inventing the future.

Meanwhile, yesterday's San Francisco Chronicle noted that in the US, the Latino demographic is the early and frequent adopter of a spectrum of mobile services beyond voice, including "messaging, downloading music, surfing the Web and e-mailing." A professor quoted in the article commented, "Things other people do on computers, a lot of Latinos do on cell phones."

It took marketers awhile to catch on to the power and vision of the Latino mobile opportunity. At first they were hindered by patronizing stereotypes that the demographic would prefer cheap, simplistic phones. On the contrary, Latinos were early adopters of the original $600 Motorola Razr. The Chronicle concludes, "Latinos are quick to embrace new technology, seeing in it a way to get ahead in life."

Takeaway for those designing or testing mobile services: be sure to include Latinos in your plans and observe their behavior carefully. They're an important mobile technology bellwether.

Some of the Chronicle's observations were drawn from a new study by the Pew Internet and American Life Project on Mobile Access to Data and Information. The December 2007 survey reveals that 62% of American adults have used either a mobile phone or PDA for a non-voice data application, or a wireless laptop connection. A majority of Americans (51%) now say their mobile phone would be the hardest technology to give up--ahead of the internet (45%), television (43%), and email (37%).

Currently 75% of Americans have a mobile phone and/or PDA. Of those, 77% have used the device for at least one non-voice application and 42% report that they engage in mobile data activity on a typical day. The Pew study found a strong affinity between mobile data applications and the Latino market, where 84% have mobile phones. Regardless of ethnicity, age is also highly correlated with mobile data use: 96% of the 18-29 age group who have mobile phones have used them for at least one data application, and 73% say they do so on a typical day. In that demographic, 62% say it would be hard to do without a mobile phone, compared to 51% who feel that way about the internet.

In Special-Purpose Communities Steak Trumps Sizzle

A consulting project I'm working on includes helping a global brand optimize and grow a special-purpose professional networking community. After the community had been in place a couple of months the client wanted to ask members what new features they'd like to see. Normally I'm all about putting the customer first, but in this case I thought it was the wrong approach. When you're building a social network in a niche market the steak should come first: get the fundamentals right. Leave the sizzle for later.

First, it's important not to set expectations you can't fulfill. In this case, the client is using a hosted solution built around a template with a limited feature set. Giving community members an open-ended invitation to suggest features the client can't deliver has a high probability of disappointment. They're likely to start listing fun or flashy applications that caught their eye on Facebook...the type of thing that builds engagement once you're a loyal member but may not correlate to establishing the core value that motivates someone to join and return in the first place.

In the early going it's smarter to concentrate on a straightforward presentation (think Google) of basic activities that create value, such as sharing questions and information and facilitating connections between people who want to find each other. Discussion groups, blogs, wikis, ratings, Q&A, and some type of personal matching engine are a good start. Early on, focus marketing efforts on building usage of essential features rather than on proliferating functionality. If the underlying concept of your community is on target, people will sign up and return with or without the extra bells and whistles. After it reaches critical mass and is yielding a positive ROI you can invest in sizzle to generate more usage and time on site.

Furthermore, while it never hurts to open communication channels and invite people to talk back, when you're operating online you don't need surveys to reveal the activities people like best. With recall more perfect than any questionnaire responses, your web analytics disclose what features people do and don't use, where they spend the most time, when they visit, and the paths they take through your site. To understand how your community is working, dive into site stats.

Here's a great example of how, in the world of special-purpose online communities, steak trumps sizzle. Just this week some former colleagues in Brazil launched a community for IT and telecom professionals, CW Connect. To get the community up and running quickly they chose a US vendor's hosted solution. In some cases, page templates unavoidably and a bit awkwardly mix English and Portuguese. But instead of stressing over imperfections, my friends focused on the opportunity of launching the first professional networking site in their market in Brazil. Instead of Facebook "feature envy" they kept it simple. The plan paid off: Brazilian IT and telecom professionals who haven't had a venue for making connections and sharing solutions are flocking to CW Connect. CW Connect is starting with a good steak, which means there will be opportunities for lots more sizzle in the future.

New Study on PR Measurement

Speaking of PR, the publication PR News has just released its Guide to Best Practices in PR Measurement Vol. 3. The guide costs $399, but you can check out the table of contents and a couple of articles for free. Chapters include Measurement Research, Measuring Media Relations, New Media Measurement, Measuring Integrated Marketing, 360-Degree PR Measurement, Measuring Reputation, Impacting the Bottomline, Measurement Case Studies, and Measurement Resources.

The web-enabled demand for measurability and demonstrable ROI is affecting every area where businesses spend to gain reputation, build brand, and promote products and services. Among the topics in the New Media Measurement chapter: Measuring Web 2.0, Measuring the Impact of Online Influencers, Measuring E-Mail Performance, How to Measure Social Relations, and A Conversation about New Media Metrics among Digital Luminaries. There's additional discussion of online and social media topics in other chapters, too.

The report notes that "measuring the value of PR's contribution to bottomline business results has never been harder--or more necessary." In any case, the focus on measurability is here to stay, and it's good to see various professional specialties specifically calling out the need to learn more.

Bypassing Media: Is PR the New Advertising?

It’s hardly news that the internet is leading to big changes for the advertising business, a transformation that has important consequences for online media companies that monetize with ad revenue. But in a Web 2.0 world where social media complicates the landscape and yesterday’s hierarchical models of content presentation give way to the audience’s collective wisdom, will brands start shifting resources from advertising to PR? If so, what does that mean for online media businesses?

Advertising and PR exist side by side, as complementary strategies for shaping opinion and motivating behavior. Traditionally, advertising has been a more direct investment in an anticipated outcome, where the advertiser has lots of control of the message and presentation—and pays for the privilege. PR, on the other hand, is about more subtle influence that attempts to work its way through the audience’s network of influencers and authority figures. It’s the network idea that makes PR an interesting option in the social media environment.

In classic PR, the “PR man” (or woman), either at an agency or a company, has a powerful file of media contacts to leverage when it’s time to get the word out. That model is endangered as change roils the media industry: there’s rapid turnover in newsrooms, and in any case, audiences now rely less on the voice of big media to tell them how to think. In a world where social networking and Web 2.0 put the “me” in media, people are more likely to depend on their favorite blogs, discussion groups, RSS feeds, wikis, online Q&A, and direct online networks such as Facebook, LinkedIn, YouTube, Flickr, or Twitter. For an old-school PR traditionalist that could be a challenge; for a PR 2.0 professional, it’s a big opportunity.

That’s because PR’s classic strength of developing opinion-influencing messaging, and its intuitive grasp of how to navigate the web of persuasion, map well to Web 2.0’s proliferating content channels and network-based communication structure. The savvy PR professional can insert himself or his brand directly into the network without having to rely on a third-party introduction from a journalist—not via subterfuge, but by establishing the client brand as a valuable information resource. Then, through strategies such as tagging, RSS, voting, and old-fashioned hyperlinking, the content is disseminated virally.

The viral uptake model is also coveted by online advertisers, who look to social media to drive deeper engagement with products and brands. To be sure social media has many benefits for advertisers, especially in uncovering preferences, needs, and affinities that can provide better targeting, higher conversions, and an advertising experience that feels less intrusive. But the fundamental quid pro quo of the advertising value proposition can only go so far in social media. There’s a point where efforts cross the line into PR. That might mean companies will shift some budgets from advertising to PR as social media gains traction, cutting media sites out of the revenue stream.

The online medium constantly challenges us to rethink assumptions about boundaries between business categories. Advertising and PR will continue to exist as the conjoined twins of the persuasion industry. But in this new world we’re creating online, don’t be surprised if the bright line that used to divide them begins to blur around the edges.

Life After Facebook: Alternative Futures for Social Networking

I had an interesting discussion today about the future of social networking. It got me thinking that this functionality is being applied in two opposite directions. One you might call the Facebook-style umbrella approach. The other is more a la carte.

Sites such as Facebook are aggregating every social connection and sharing feature they can think of under one roof. Everything you’d want to do with your friends, relatives, business contacts, and other acquaintances—or even people who aren’t yet acquaintances but whom you’d probably like to know—is facilitated or enabled under a single social networking brand. It’s very efficient: create one profile, upload photos and videos to one place, enter one friend list, etc. More important from the business perspective, the brand gains tremendous insight into each network member, information that can then be used to target advertising or in other monetization schemes.

In the Facebook scenario there are only a few winners and many losers—similar to how EBay is on top with online auctions, Google wins web search, and Amazon corners the market for online book sales.

At the same time, though, there’s an alternative trend with many winners. These are the sites that are picking and choosing social networking features to enhance businesses across the spectrum of online services: media, e-commerce, financial services, games, informational sites, and all the rest. They aren’t Facebook rivals; they just want to harvest some of the engagement, loyalty, content creation, cost savings, insight into user preferences, and other benefits that various social strategies have to offer.

Sites that use these features well will enhance their businesses. Also, there are significant opportunities for third parties to provide software-as-a-service functionality to customers who lack the technical proficiency to develop applications themselves. While the universe of possible interactions online expands, the user experience paradigms converge. Business opportunities multiply. Sometimes the sum of the parts exceeds the whole.

Trendwatch: What Can Web 2.0 Do for [Your Business Here]

In the past few weeks I’ve heard from several companies that are interested in using Web 2.0 techniques and technologies to enrich their online businesses. The interesting twist is that they aren’t media companies; they’re leading brands in fields such as e-commerce, financial services, and hardware. The Web 2.0 phenomenon has become such a vital element of the online user experience that audiences are demanding it on all the sites they frequent. It’s changed the way people see their own role in terms of interacting with businesses and information.

Web 2.0 started as a media tool that enriched content, generated more pageviews to monetize through advertising, offered a low-cost alternative to content creation, and opened additional channels for distributing content. Using strategies such as AJAX, it provided a richer and more information-dense environment with less visual clutter. It gave the audience a seat at the table rather than a glass pane to press their noses against. The response was highly favorable: sites that adopted a Web 2.0 approach noticed they had more visitors who returned more often, spent more time on the site, and created lots of content. Web 2.0, it turned out, leads to the prized results of deeper brand engagement and loyalty.

If you need a refresher course in Web 2.0, Tim O’Reilly defined it in detail in a well known article he wrote in 2005 (now available in your choice of eight languages). As a quick primer, he contrasts the 1.0 and 2.0 web experiences like this:

Web 1.0		Web 2.0
DoubleClick	-->	Google AdSense
Ofoto	-->	Flickr
Akamai	-->	BitTorrent
mp3.com	-->	Napster
Britannica Online	-->	Wikipedia
personal websites	-->	blogging
evite	-->	upcoming.org and EVDB
domain name speculation	-->	search engine optimization
page views	-->	cost per click
screen scraping	-->	web services
publishing	-->	participation
content management systems	-->	wikis
directories (taxonomy)	-->	tagging ("folksonomy")
stickiness	-->	syndication

The time that’s passed since the Web 2.0 concept was defined is like eons in “internet time,” yet surprisingly many major sites still haven’t gotten the message, and some Web 1.0 sites are still attracting investment and launching, seemingly oblivious to progress in the last five years. Against that backdrop it’s exciting to see online businesses beyond the media industry starting big initiatives to tap into Web 2.0’s power to engage customers, expose them to more products, solve problems, and spend more time on the site. Tools such as community, platforms for user-generated content (discussion groups, blogs, wikis), ratings, RSS feeds, AJAX, multimedia, tagging, and facilitating peer-to-peer interaction vs. a linear business-to-customer approach, are quickly becoming the norm for a spectrum of online activities, not only defining the user experience in the media niche.

In the next waves to break, Web 2.0 is expanding to mobile (the “phonetop”) and ideas about Web 3.0 are starting to coalesce. These days, whatever your online business, envisioning the future in 1.0 terms is like trying to get a clearer picture by adjusting the rabbit ears on a black-and-white TV.

Kauffman Foundation Study: Characteristics of Startups

Last month the Kauffman Foundation released results of its annual survey of businesses that launched in 2004, which explores the unique character of startups from perspectives such as financing, staffing, intellectual property, and owner demographics. The foundation calls the Kauffman Firm Survey, which is tracking the fortunes of about 5,000 companies, "the largest longitudinal study of new businesses ever conducted." The results so far cover the cohort's operations in 2004 and 2005.

Unfortunately the research buckets businesses into antiquated categories that make it impossible to drill down to specifics for online or web services companies (for example, the categories in "high tech" are based on 1991 definitions limited to "chemicals and allied products, industrial machinery and equipment, electrical and electronic equipment, and instruments and related products"). Nevertheless, with startups being such a critical component of Silicon Valley culture and a major driver of innovation in the online and social media space, the survey's findings are interesting. Some highlights:

• More than 91 percent of the businesses survived their first year
  
• Consistent with Silicon Valley mythology, almost half the new businesses reported operating from home or a garage
  
• About 2 percent received patents during their first year of operation, 9 percent received copyrights, and 13 percent received trademarks
  
• Almost 60 percent reported no employees and about a third had 1-5 employees; less than 4 percent had 11 or more employees
  
• Less than 30 percent offered health insurance and only 6 percent offered stock options
  
• 37 percent reported no revenue and 17 percent had annual revenue above $100,000; less than 5 percent had profit in excess of $100,000
  
• 56 percent of the companies used debt financing in their first year of operation; 23 percent borrowed $25,000 or more. Of those with debt financing, 48 percent used personal debt, often credit cards. About 25 percent took on business debt.
  
• 80 percent used equity financing and 9 percent had equity greater than $100,000
  
• 69 percent of owners were men; 81 percent were white, 9 percent black, and 4 percent Asian. 19 percent were under 35, 63 percent were 35-55, and 18 percent were over 55.
  
• About 23 percent had some education beyond a four-year college degree; 53 percent did not receive a bachelor's degree
  
• For 58 percent of owners, this was their first startup. 6 percent were serial entrepreneurs who had launched four or more companies.

Check out the full report for more details.

Social Networking the Next Generation: Kids' Sites

I've been checking out social networking sites for kids. Although the idea seems like a natural it's a more challenging market than for adults because of extra concerns about safety, privacy, and marketing. From the business perspective these add cost and complexity that can slow the growth rate and concern investors.

I haven't covered the full spectrum of options yet, but so far it seems like this is one area of the web where the US is in second place. From what I've seen the Japanese site Sanriotown--populated with the wildly popular Sanrio characters such as Hello Kitty--is the leader, with the most full-featured, fun, and not overly commercial features that include the requisite games as well as blogging, polls, discussion groups, videos, and more.

US sites are more specialized. Imbee is an independent site with a strong content creation platform, including blogs, audio, video, photos, and trading cards. Disney's Club Penguin (purchased from the founders last year for $350 million) focuses on games and chat and touts the fact that it's ad-free...but there's a prominent shopping link. Disney also maintains the Virtual Magic Kingdom (VMK) site, which offers gaming and a tie-in to the theme parks. Webkinz has an unabashed tie-in to the stuffed animals sold by its parent, Ganz. They offer games and chat. Nickelodeon's Nicktropolis is connected to the parent TV network, offering lots of Nickelodeon video plus games. Mattel's Barbiegirls also has games and chat, plus a "design fashions" feature. Most of the sites with gaming also offer the opportunity to create and decorate a personal space, or "room."

Interestingly, the kids' social networking sites are adopting more gaming-derived virtual world technologies than their adult counterparts. This seems to validate the vision that some day (perhaps when these kids grow up!) many web interactions that now occur in static media such as text will migrate to a 3-D virtual reality format along the lines of the Second Life platform.

Just as with social networking for adults, the kids version is attractive for its powerful engagement and loyalty attributes, as well as highly scalable model of user-generated content.

Because of the somewhat higher barrier to entry there's currently less competition among kids social networks than in the comparable adult space. As clear winners emerge on the adult side, expect competition to pick up significantly in the kids arena. Looking at the products currently on the market, there's lots of room for innovation and better quality before this niche is mature.

Hello Kitty Online: virtual (sur)reality integrated into online social networking:

Social Networking: Connections and Reconnections

A current trend in social networking is empowering real-time connections--think Twitter's up-to-the-minute mobile tweet-streams. A startup I'm working with, iPling, helps you connect to others nearby who share your needs and interests at the moment. But there's another side of social networking, reconnecting with people you may have lost touch with. Venerable sites such as Classmates.com have offered that service for years. Now it's getting more sophisticated.
Last weekend I tried out the reconnection angle by creating a group on LinkedIn for colleagues at a former company, GoTo.com. An Idealab spinoff during the dotcom boom, GoTo--based in Pasadena, California--was founded in 1997, went live with a product in 1998, and morphed into Overture Services in October 2001. In 2003 the company was acquired by Yahoo; the name changed again, to Yahoo Search Marketing (YSM), and operations moved to Burbank. GoTo was notable for originating the world's first successful pay-for-performance bidded marketplace for search advertising--the product concept Google improved upon when it created AdWords.

The company also gained a bit of notoriety as the object of one-time celebrity stock analyst Henry Blodget's hypocrisy, when he publicly touted it, pumping up the price, while privately disparaging it--an action that eventually attracted securities fraud charges from the SEC.
My first day on the job at GoTo was Monday, March 13, 2000...a date memorable as the first business day after NASDAQ hit its all-time high of 5132.52 on Friday, March 10. In other words, my first day in the internet sector coincided--hopefully in a random rather than correlated way--with the beginning of the bubble bursting. For a few weeks I worked in the helium-headed environment of the bubble days--a time when GoTo still aspired to be a consumer portal rivaling the likes of Yahoo. As 2000 wore on and we began to accept post-bubble realities a new, less costly business model was needed. The biz dev team began talking to large portals about a back-end service to monetize their search traffic. In the fall of 2000 we went live with a partnership with AOL and GoTo v2.0 was born. The new strategy was so successful that we were one of the few dotcom winners in the difficult 2000-2001 period.

As is often the case, competition eventually eroded our success. Google launched its competing cost-per-click version of AdWords in 2002, luring away AOL. Because we were completely dependent on partners for distribution, and therefore for all-important scale, our stock price became quite volatile, shooting up and down as big partners signed or departed. Also, as the partners recognized their critical role, they bargained harder and our margins shrank. Ultimately, acquisition by a large portal that could guarantee a steady traffic stream made good business sense.

In any case, I left GoTo--by then Overture--in February 2002 for a job at Yahoo. When I arrived at GoTo two years earlier, it was in the midst of ramping up after an IPO the previous summer. There were about 250 employees when I joined and close to 1,000 when I left. It was a pretty tight-knit group that had been through highs and lows together and bonded accordingly. When Yahoo bought Overture in 2003 it was a reunion with old colleagues, many of whom I continued to work with until I left Yahoo in 2005.

Recently, with the corporate turmoil at Yahoo, I noticed a number of connections from the GoTo days were reaching out to fellow GoTo "alumni" on LinkedIn. Since I have a special interest in social networking and media, I decided to take the small step of creating a GoTo group. LinkedIn makes it easy to set one up and invite a seed group of members. From there, virality takes over, as friends and friends-of-friends show up in one another's updates and display the group logo. Already, less than two days after inviting the seed group, there are more total group members than initial invitees.

My biggest gripe so far is that I have to hand-approve membership requests from people not on the invite list. I would prefer that people be allowed to join by default, then inappropriate individuals could be removed if needed. However, LinkedIn doesn't offer that feature. One thing's for sure: with hand approval required, LinkedIn gets a lot more pageviews.

By the way, if you worked at GoTo before it was Overture and want to reconnect with old friends, you can join the group here

Washington Post's Peep Show

For media web sites, slideshows are a great way to get your audience to spend more time on the site and give you more pageviews. When I was leading InfoWorld.com they were an important strategy in our successful efforts to build engagement. Like many relatively simple solutions, slideshows have been around awhile but the concept continues to evolve.

On Sunday WashingtonPost.com had a great feature that combines the power of the slideshow with user-generated content: Peeps Show. Getting away from its staid image (another must to succeed at online media), the Post invited its audience to create dioramas based on the chemically candy treats/pop culture icons known as Peeps (more on the Peep phenomenon in the Wikipedia). Timed for Easter, the peak Peep season, the Post selected finalists from over 800 submissions, then presented them in a slideshow.

Augmenting the slides were a text article about the contest, an online voting form allowing the audience to select a favorite, and an interactive live chat with Dan Zak, the Post reporter who managed the contest. Today the slideshow is ranked as the most popular show on the Post site and over 4,000 people have voted on favorites. The Peeps content is a nice win for the Post and a great example of how to leverage content in ways that are optimized for online media.

Ready for Its Closeup: Study Checks State of Media in 2008

There’s been some buzz this week about the Project for Excellence in Journalism’s new State of the News Media 2008 report, which records the Norma-Desmond-like dilemma of traditional media faced with a growing disconnect from leading-edge trends and popular taste. “The crisis in journalism, in other words, may not strictly be loss of audience. It may, more fundamentally, be the decoupling of news and advertising,” the massive (180,000+ words) study frets.

Time for a wake-up call! In the media business advertising follows audience. Making that happen is the function of marketing and sales. The audience is attracted by content. The business formula isn’t very complicated. What’s changed is that online, not all content needs to be created by professionals, and distribution opportunities are vastly larger than with traditional media.

As its sponsor’s name suggests, this report was assembled from the perspective of self-identified “professional media,” some of whom are having trouble accepting that they’re no longer indispensible for setting the national—indeed, global—thought agenda. Some sections read like a portrait of a massive industry in eclipse. The study rather hopefully observes that “even with so many new sources, more people now consume what old media newsrooms produce.” True enough, but a rising tide floats all ships. Online, audience growth alone isn’t enough to ensure commensurate increases in revenue and profits.

Details in the study begin to pinpoint a big problem: high-cost professional content mills that too often are out of touch with audiences’ information needs and consumption habits:

• “The media and the public often disagreed about which stories were important in 2007”
  
• “Most Americans believe the news media are politically biased, that their stories are often inaccurate and that journalists do not care about the people they report on”
  
• “News people are uncertain how the core values of accuracy and verification will hold up”

Some media companies may also have lost sight of their fundamental business, delivering audiences to advertisers. “Advertisers no longer have to depend on paid media to distribute their messages,” the report hypothesizes, citing alternatives including starting their own web sites, posting to YouTube, or guerilla campaigns. But each of these options has a cost and as the study rightly notes, savvy marketers are more attuned than ever to ROI. The challenge for media businesses is to deploy resources to deliver superior ROIs, acting as specialized marketing channels for the advertising community. That’s always been true in media and the advent of the internet hasn’t changed it.

Most acutely, the new report raises the question of the future of branded media “in an age when so much information is so readily available that it is viewed as a commodity.” Bottom line, brands exist as a strategy for capturing higher margins. In the online media business, where the competition is only a click away, it’s only worth incurring the cost of creating branded content to the extent that it monetizes better than commodity content created by partners or the audience itself—for example, by attracting a demographic advertisers pay a premium for.

To fully close the loop, sales teams and advertisers need to buy into a site’s content strategy. The study observes that may not yet be the case. “The business side has begun to be identified as the problem area, the place where people are having the most difficulty changing,” it comments. And, “Madison Avenue, rather than pushing change, appears to be having trouble keeping up with it.” The report finds the “ability to get much more granular data and the pressure felt by chief marketing officers to justify their ad dollars have made ad spending accountability the No. 1 priority among marketers today.”

The study closes with a prediction: “2008 looks to be the year the mainstream press tries to lure citizens toward creating the content within their own outlets.” Once they attract the user-generated content, it will be interesting to see what they do with it—how it’s monetized and whether it’s fully integrated into the site or cordoned off in a UGC ghetto.

A Misfire in the Dark: How Not to Do Online Media

There's been some hype lately for wowowow.com, a founder-funded web site for "accomplished women over 40" that launched last weekend (press release here). Last week it was featured by the New York Times, PaidContent.org, and Mashable, among others; it was on Good Morning America today. Notably, the founders are all women in media. But unfortunately for the many people who think wowowow is a promising concept and would like to see it succeed, the founders are all from traditional media, and the old-fashioned business assumptions they bring from that environment result in a "me-too" web site that misses many opportunities for thought leadership and innovation.

Wowowow is what happens when traditional media thinking intersects the online medium without much thought to the dramatically different business environments the two platforms present. And by the way, I don't mean to pick on wowowow specifically. It's typical of many middling web businesses these days, and for that reason presents a good object lesson in how not to build a media web site in 2008.

In traditional media, because of high unit costs for production and distribution, it makes sense to start with a narrowly targeted, high-value concept--such as serving the information needs of affluent older women. Your brand identity is tightly connected with a restrictive definition of audience. You don't want to waste resources creating products consumed by people your advertisers don't want to reach. With traditional media, the advertising opportunity is the starting point for the business concept.

Online is the opposite; it's all about scale. While the low barrier to entry online makes it easy to create niche sites such as wowowow, the greatest rewards are reserved for those who tap into the web's extraordinary scale opportunities. So online media is about inclusivity and the starting point is the audience. The key to delivering value is the ability to segment that audience for advertisers who want to reach niches--self-segmentation through content affinity, inferred segmentation through behavioral targeting, demographic segmentation based on profile data...whatever.

The economics of online favor scale and online technology facilitates segmentation. Therefore the web also favors diversity, a larger pool from which to segment. Demographically monotonous sites such as wowowow come up short.

Interactivity also differentiates the online medium from its traditional ancestor. People who prefer to receive content in a passive way gravitate toward the one-way, top-down mode of traditional presentation. Those who consume content online see themselves as co-creators of the site experience and expect a conversation. While wowowow allows comments on the articles it presents, it doesn't give the audience a full seat at the table when it comes to generating content and connecting with one another. Related, the web is about democracy. You create content, I create content; we share opinions and debate basically as equals. Instead of any of this wowowow has an old-school, nose-against-the-glass feel as the audience mainly observes the antics of the celebrity founders and their pals.

Traditional media is also segmented by medium: video is on TV, audio is on radio, print is in newspapers and magazines, and the various media rarely intersect. Wowowow honors this tradition by being text-centric, rather like a web site from the last century. But fast-forward to 2008 and you'll notice that the best sites are all polyphonic, telling their stories with a mix of audio, video, text, slides, interactive graphics, and more. Check out CNN's forward-thinking design, for example, where content on a variety of platforms, by both paid staff and citizen journalists, coexists on the home page. The goal is to tell the story through the medium the audience will find most appropriate and compelling for that message.

Finally, the web is also about technology. This manifests itself in many ways, from the how the site functions to content about the tech-driven gadgets we all use. Wowowow seems almost devoid of technology; I looked in vain for a bit of AJAX and couldn't even find an RSS feed. Paradoxically, the founders seem to believe their online audience are stuck in the age of rotary phones, film cameras, 45 rpm records, and ViewMasters. You have to believe, if your audience is online, that they have some interest in technology and appreciate good web design. Show them some respect with a technically competent site that invokes the wow factor.

The web is all about innovation, and innovation is all about overcoming fear of failure and embracing risk. Sites like wowowow seem a bit timid to let go of business ideas that succeeded back in the day of traditional media. Concepts about demographic targeting or content subject matter alone aren't sufficient to drive online innovation. You have to insert these into a bigger picture vision of the medium and its future.

A Growing Role for Social Media

A recent blog post by Forrester analyst Jeremiah Owyang on his report “Online Community Best Practices” has generated an interesting comment thread that not only contains the sorts of tips teased in the title, but also highlights current thinking about communities as platforms for both media and marketing.

The post is primarily an ad for the full report, which is only available to Forrester clients (I haven’t read it). That document is based on interviews with 17 community leaders and aims to uncover commonalities in successful online communities. However, Owyang shares a few high-level tips for free. “Above all,” he advises, “remember that control is in the hands of the members, so put their needs first, build trust, and become an active part of the community.” The most successful communities were created by people who “acted more like a host, rather than a policeman,” Owyang observes.

Once they launch a community many companies face hurdles making it grow, he continues. Owyang recommends thinking of a community as a product in development. To build and grow it you need to define the objective, create a roadmap, assemble the right team, and be prepared to adjust plans as needed. To maximize the chances of success launch the community with backing from its most enthusiastic members and stay engaged as it grows, he advises.

The blog also shares a slide from the full report that correlates various stages in the community’s lifecycle to different growth rates. In the early strategy and research phases growth is slow. Member activity ramps up steeply beginning with launch and proceeding through kick-start, growth, and ongoing management—what Owyang calls the community’s “adolescence.” After a time, following the classic “S-curve” of product adoption, the community reaches “maturity,” when increases in activity are only incremental. At this point the sponsor’s role shifts to ongoing management and continual improvements, Owyang says.

As enlightening as Owyang’s brief summary of the report are some of the comments it generated. Among the highlights:

• Unrealistic expectations can doom a community project. It’s important to get everyone on board with achievable expectations early in the process
  
• Focus on engaging, useful content instead of pushing your brand objectives too hard
  
• Get management on board with a community by demonstrating ROI
  
• Communities are about people first; the underlying products or services aren’t really important
  
• Successful communities don’t succeed on their own, they require planning, management and marketing commitment
  
• Community growth may not always be a smooth curve; often there are big spikes that correlate with, for example, new product releases or marketing initiatives. It’s important to anticipate spikes and be prepared to deal with the issues they create, such as site performance, moderation and support needs, and spam.

Both Owyang and his readers also share insights into the future direction and value of the social media movement. Owyang foresees it becoming a core business function, almost like email. At some point, he says, “online social communities will just normalize, and everyone will say ‘duh’ this is no-brainer, improving communication with customers is a core function of every company.” A commenter agrees, “online communities are simply the next iteration of customer communications,” one that empowers members to interact directly to one another, in addition to dialogue with the community host. Another reader ventures that communities are “the future of marketing for many companies.”

Having both started and managed online communities I agree with these insights and am glad to see more high-level thought and discussion around community dynamics. Above all, anyone contemplating using a community for marketing or content generation needs to do so not reactively--because it’s a fad or because a competitor has one—but as a thoughtful and purposeful attempt to solve specific business problems, such as the cost or content or brand engagement. Communities both large and small are rapidly rising features in the online landscape; social networking is joining ecommerce and media as a true wealth-making “killer app” of the digital age. For those of us making it happen it’s exciting to join the discussion about the big picture and help frame the vision of how best to channel this powerful force for change.

Measurability Is Key for New Content Products

While the web provides an advertising environment with the potential for unparalleled visibility into marketing spend and ROI, tools to help agencies and advertisers make the most of the opportunity have lagged behind. Many companies are working on pieces of a solution, but few have the scale to implement products that cut across the highly fragmented online landscape and gain critical mass.

Last month Sapient, the online marketing and consulting firm, released results of a survey that suggests the rapid growth of Web 2.0 content and presentation options is only making the problem worse. “Marketers lack the tools necessary to optimize their marketing efforts across the full spectrum of digital channels,” Sapient concluded. Survey respondents were particularly interested in social media, but found those results hardest to track.

The respondents were comfortable with their ability to measure responses to email and search marketing efforts and wanted comparable accountability for spending in other channels. They also wanted reporting that provides “apples to apples” results across all channels to facilitate ROI-based spending allocations, and rapidly updated data that allows near-real-time spending adjustments to capitalize on emerging opportunities.

The takeaway for anyone managing a media site: it’s increasingly important to build measurability into new content products. Until a grand, cross-channel solution comes down from the likes of Google or Yahoo, your ability to provide metrics will directly correlate to your ability to monetize. Advertisers are demanding better measurability and for now, they’re leaving it to you to solve the problem.

Next-Gen Advertising: Technology vs. Business

You may have seen the recent comments by Wenda Millard dissing both Yahoo's and Google's huge, ongoing efforts to reinvent advertising for Web 2.0 and beyond. Wenda used to head Yahoo's ad sales efforts and is now president of media at Martha Stewart Living Omnimedia. She chided both Yahoo and Google for a one-dimensional view of the future of advertising that's too focused on technology, at the expense of advertisers' business needs.

Advertising, she observed, is "not a business only of science. With the Google/DoubleClick combination, and the potential Microsoft/Yahoo combination, it’s like the scientific community is taking over the advertising business--and the ad business is not about algorithms.”

Google and Yahoo are key to the future of online advertising because they command such huge chunks of the online audience. Although many others are interested in evolving the advertising model, most lack the scale to get much traction in an industry where the changes they advocate will require a large redeployment of resources (MySpace could be an interesting exception).

In the last several weeks I've talked to some of the folks at both Google and Yahoo who are working on "Advertising 2.0" projects, so I can verify first-hand that both companies are taking the technology-first approach to their initiatives. The role of business people who understand the advertiser-agency dependency and bigger-picture brand advertising needs varies, but seems a bit higher profile in the Yahoo effort. Both companies, but especially Google, identify as technology businesses and want to present technology solutions.

In advertising this is an especially tricky aspiration. If the problem were straightforward to solve, online advertising advances would have kept pace with those of content and UI...yet they haven't. Online, technology is the sine qua non of innovation, but all the amazing technical possibilities need to be channeled into productive problem-solving and business models to bear fruit.

Part of the complexity comes from the necessary role of ad agencies. Looking at the industry from the 50,000 foot level, agencies seem ripe for disintermediation by more efficient technical solutions. But in reality, they have a vital role in the ecosystem. For media properties they simplify penetration; for advertisers, they open the door to technologies and products that many individual clients are too unsophisticated to utilize on their own. Agencies allow advertisers to outsource many technical complexities, and therefore are more valuable--not less--in the world of Advertising 2.0.

Also, a lot of activities occur under the "advertising" umbrella. Some, such as the straightforward lead generation represented by programs such as AdWords and Yahoo Search Marketing, are spectacularly suited to technology innovations. Others are trickier. Certainly technology can help with the accountability and measurability advertisers demand, but what about engagement? Are these new programs truly seeking to uncover and solve merchants' deepest needs from the media community, or are they aiming to optimize products that are actually flawed vestiges of a prior-day mindset--such as banner ads. The people I met with at Google and Yahoo seemed reluctant to innovate deeply enough. That's one reason I'm wondering whether MySpace and Facebook may end up eclipsing today's moonshot-level efforts to build the ultimate buggywhip.

Yahoo: Time for Act 3

With all the drama around Yahoo this month I’m glad I’m only watching from the sidelines. However things turn out, it’s certain that the company that emerges will be quite different from the one that has disappointed investors, employees, and, too often, users in recent years. Of course, the multibillion dollar question is whether the rapid changes will solve Yahoo’s problems or exacerbate them.

As to a Microsoft acquisition, if scarce resources were the problem—as they often are when early-stage companies are acquired—a buyout could be a solution. Microsoft’s market cap is close to double Google’s. But even in its current reduced circumstances, Yahoo has never lacked money or people to throw at perceived problems. Instead, the shortfall has been in identifying the best opportunities and efficiently deploying available resources to capitalize on them.

Perhaps Microsoft could help there, too. Despite some well publicized flubs no one doubts it’s fundamentally a well managed company with deep technical expertise. Unfortunately, though, history has shown Microsoft’s strength is in software, not media. There’s a huge question mark around the proposition that two companies with faulty radar and shaky track records could, if combined, somehow challenge the market powerhouse.

Yet it’s equally hard to picture the Yahoo that exists today turning itself around as an independent entity. The final tally isn’t in, but so far the names of layoff victims popping up on the web include few of the operating executives who have consistently failed—seemingly without consequences--to set coherent strategic agendas, execute against goals, and raise profits. Maybe bigger changes are coming, but Yahoo needs to understand that dramatic corporate transformation starts at the top, not the bottom. Getting rid of 1,000 mid-level functionaries might raise profits a bit but it won’t revitalize strategy, repair morale, kickstart innovation, or operationalize abstract theories.

If resurrection sounds impossible it’s worth recalling that Yahoo did it once before, in the wake of the dotcom meltdown. In September 2001 the stock bottomed out just above $4 per share (split adjusted), and a year later it dipped almost that low again. Then the price grew almost 10x over the next three-plus years; however, it’s been in fairly consistent decline (until the Microsoft offer) since January 2006.

I joined Yahoo early in the turnaround, in February 2002, and left in October 2005, just before the peak. Watching the company recover and grow—and then seeing the seeds of future failure begin to take root—was a vivid demonstration of management lessons I’ll apply for the rest of my career. Back in 2001 it was far from certain whether Yahoo would survive at all or become another dotcom casualty, the next Webvan or Pets.com. A raft of the company’s most senior executives departed and Terry Semel arrived in the spring of 2001 to launch Yahoo’s second act.

These days Terry’s name is typically associated with Yahoo’s recent decline, but back then he brought a bracingly fresh perspective: to focus Yahoo as a media business whose primary monetization strategy was advertising. Previously advertising was in the mix but the company was also drifting toward low-margin web services. Terry immediately went to work staffing up with media pros who recast Yahoo in a strikingly different and more business-centric mold than the original feel-good dotcom culture. Inevitably there were clashes between company veterans and the newcomers. Most of the time a good business case prevailed over tradition; after all, at that time we all felt that the very future of the company was at stake.

As Yahoo prospered the pendulum began to swing. We made acquisitions and didn’t do a good job of melding their benefits with our winning Yahoo culture. As revenue ballooned, managers became blasé about profits. For instance, a VP I reported to once told me the $10 million one of my projects added to the bottom line only amounted to a “rounding error.” I joined a lean company (2,000 employees in February 2002) where we product managers prided ourselves on efficiently producing the output of two or three people in traditional businesses. By the time I left the attitude had reversed and we were hiring two or three heads to cover work that should have been done by one.

Yesterday’s dotcom darling became today’s dog. Having a nontechnical leader at a technology company led to too much delegating and too many bad management calls. With his more traditional business background, Terry underestimated the pace of change and intensity of competition when you operate on “internet time,” an environment that magnifies the consequences of good and bad decisions alike. In the blink of an eye a competitor can not only surpass you but gain a shocking lead.

Yahoo got lucky a few times in the past but may have run out of rabbit's feet. The company that turned itself around six years ago was smaller and simpler, as were its competitors. The job market in those days was full of untapped talent after the dotcom downturn. In classical drama a comedy ends in a wedding, while a tragedy ends in death. It’s not clear how Yahoo’s third act will conclude, or whether there’s even much difference.

More Paid Online Content Bites the Dust

You may have seen the news last week: another bastion of paid online content, Atlantic Monthly, has changed its business model and is offering all of its content online for free. Earlier this week Rupert Murdoch discussed placing more free content on his WSJ.com site, although he's still not ready to follow up on earlier suggestions that he'll reverse the staid Journal's tradition and remove the gates from the entire site.

After initial futile resistance, major newspapers including the New York Times and Los Angeles Times gave up on the paid model some time ago. Is there still anyone who seriously believes paid content is the right approach to an online media site?

Of course there are corner cases where it makes sense--if the content is highly valuable but the audience is small. But these types of businesses aren't optimized for the web, whose high fixed and low variable costs favor a scaling strategy. You also hear analogies with HBO. But bear in mind, paid cable emerged as a segmentation strategy after the broadcast medium was mature. By contrast, the internet as a media platform is in its infancy, with years of strong global growth still ahead.

I think some of the confusion results from the belief that the online medium is "just another" way to distribute content. True, but it's an alternative with a completely different cost and revenue structure. Failing to recognize and adapt to this, you will most certainly leave some money on the table. The fact that paid content worked so well in some other medium, such as print, doesn't predict that the old business model will perform just as favorably in a new environment.

I've laid out my reasons before for being such a strong advocate of most online content being free. Bottom line, to reap the maximum benefit, adapt your business strategy to the specific business environment where it's executed. One size doesn't fit all.

Don't Forget the People

I was having lunch the other day with my friend and fellow UCLA business school alum, Manuel. I'm working with him on his latest venture, iPling. He summarized a key learning from his career as a serial entrepreneur: don't forget the people. Without the right people with the right skills focused on the right problems, you can't succeed. That's even more true in a startup environment, where teams are small and lack the redundancy of a larger company. Part of the volatile nature of an early-stage startup is that any failure can become a critical failure. Good team chemistry is vital.

In a startup you're often working with the smartest and most driven people, all of whom are used to setting their own agenda and proceeding according to their own best judgment. It can be tough getting everyone pointed in the same direction and motivating them to put the customary ego on the back burner for the sake of the team, even when the future of the entire organization--and the welfare of each of its individual members--is at stake. It's almost like a real-world game of Prisoner's Dilemma.

But the people equation is important in large organizations as well. In that context I'm reminded of my days at Yahoo. When I arrived in early 2002, the company was relatively small (about 2,000 employees--today, I hear, it's around 14,000) and focused in terms of rigorously screening potential hires for similar professional and educational backgrounds, work ethic, business values, and so forth. But within a couple of years Yahoo acquired some companies that weren't such a tight fit, and little effort was made to align the old and new cultures. Viewing the situation from the inside it seemed to me and some others that starting at about this time, increasing amounts of energy were diverted into attempts at negotiating culture imbalances--for example, different visions for product development, management, and marketing procedures and different sales strategies--at the expense of executing on revenue projects. Leadership didn't identify, understand, nurture, and enforce success vectors and best practices. In the end this "people problem" was one of the reasons Yahoo lost its market-leading position.

I haven't worked at Google, but I hear from people who do (fellow Yahoo alums, as it turns out) that the situation there is different. As large as Google has grown, the company still maintains tight control of the applicant screening process to be sure anyone allowed through the gate complements the existing corporate values that have proven so successful. The higher the position level the more rigorous the examination, I'm told. And it's hard to argue with Google's success. They understand that having not just the "best" people, but the right ones for their organization, goals, and strategy, is a critical element in business performance.

Manuel hasn't built the "next Google"--at least not yet--but his vision is on target. There are lots of things to deal with in a startup: money, product, positioning, marketing, business strategy, and more. But as Manuel points out, don't forget the people. They're the ones who make it all happen.