Free Rise

I’m no statistician, but I love data. And while I spend a little too much of my day with economic and marketing charts, I occasionally enjoy geeking out with other fun data.

And so when the NFL announced that my beloved Miami Dolphins would have the league’s toughest 2009 schedule, I sought reassurance in the numbers.

The NFL is notoriously topsy-turvy. Due to the high turnover of players, coaches, and team surgeons, about half of playoff teams this decade failed to return to the playoffs the following year. Given that, what exactly is a measure of “strength of schedule” as defined by opponents’ prior year won/loss records really worth?

Quite a lot, actually. I looked back at 2008’s strength of schedule rankings, as defined by opponents’ 2007 W/L percentages. Then I compared against how tough those 2008 opponents turned out to be, as defined by Football Outsiders’ amazing DVOA metric of team efficiency.

The sad-sack Browns, Bengals, and Lions ranked 1-2-3 in opponents’ DOA (partially because they never got to play themselves), but the Super Bowl champion Steelers were right there at #4. The Titans and 49ers’ schedules were significantly easier than projected, while the awful Raiders and Chiefs’ schedules were projected to be terrible and turned out average.

Overall, though, the correlation was uncanny.

That, my friends, is an r-squared of .534.

This season, the AFC’s best division in 2008 (the East) is scheduled to play the NFC’s best division in 2008 (the South), so the top eight slots for strength of schedule are held by those eight teams. Unmeasured in this metric are the details of the schedule. In addition to the #1 ranking of opponents’ 2008 W/L record, the Dolphins must play a Sunday west coast road following a Monday night home game (both against 2008 playoff teams), a Thursday night road game (against a 2008 playoff team) following a Sunday home game, a stretch of four road games in five weeks, and two outdoor cold-weather games.

And then there’s that r-squared.

Ah, who cares? This season is going to fun. Bring ‘em on.

Last Friday, I spent part of a sunny afternoon on the patio of Delancey’s Crossroads Café, chatting over coffee and tea with Randy Almond, Yola’s VP of Marketing. Yola, which recently rebranded (from Synthasite) and relaunched at this year’s Web 2.0 Expo, has developed a killer drag-and-drop browser-based platform for small businesses to develop their own websites and blogs. I’ve tried it out, and it’s a superior product.

Yola’s still working on positioning itself as a small business specialist, but its potential seems awesome. They currently operate a “freemium” business model, charging nothing for the product and the hosting (which is also free of ads), but cross-selling custom domains and SEM to their users. More importantly, as Yola ramps up its user base, it’ll have the relationships with customers to further cross-sell online services, especially when they want to bring e-commerce or apps to their sites.

As I learned in my years developing small business products at Wells Fargo, SMB’s needs are wildly different from those of consumers or large enterprises. “No-duh,” you’re thinking. But I’ve come to be unsurprised whenever I meet someone struggling to market services to SMB, simply because they don’t understand how their customers operate and why they buy.

A couple months ago, I met with two sales executives at Network Solutions in Virginia. Like Yola, NetSol also positions itself as a SMB-focused service company, a market niche made necessary by losing its domain registration monopoly in the late ’90s. (The reg business, 90% of their revenues just six years ago, is now just 45%.) NetSol successfully figured out that the vast majority of SMBs are very small indeed, and that domain registration is just the first handshake in what can be a broad service relationship. Broading this relationship, however, requires NetSol to cross-sell and service the customer effectively and respectfully. But it took much of this decade for Network Solutions to get the formula right.

Meanwhile, all types of SMBs are trying to figure out how to leverage online tools and platforms to drive customer acquisition. SEM and SEO are king and queen of this realm, but they’re relatively new and utterly confusing to most SMB managers. If Clickable’s research is accurate, it’s unsurprising that only 50% of Google self-service advertisers return the next year. But think of all the opportunity Google has to turn that around by making their platform and corollary services ever more SMB-oriented.

Yelp is another site that’s potentially awesome (or disastrous) for SMB. Just two weeks ago, I got my hair cut at Spargo in downtown SF, based on Yelp’s wildly positive recommendations. When I told my haircutter that Yelp brought me there, she seemed about as surprised as she did when I admitted I’d never had a manicure. Yelp relies on a community of consumers to build support for a business, but also permits a business like Spargo to augment its presence with pictures and even a “June Caveman Special.” (Yelp has unfortunately also taken heat from business owners who claim that buying advertising will get you special treatment, like deleting disputed reviews.)

So what do small businesses want? While a one-person plumbing operation and a 35-employee web services company may seem to have little in common (and any company wishing to serve both should have a segmentation strategy), small business owners have some broad things in common. They want:

• to be respected. Small business owners have neither time nor money to waste. As a Twitter evangelist learned the hard way in a San Francisco Small Business Week event two weeks ago, SMB managers want to understand, decide, and move on. They do not want to be told to “play around with it.” They’ve don’t have the bandwidth to fiddle; they’ve got to make payroll this week.
• to be served NOW. When they have a problem with you, they need a solution. Now. And on their schedule, which is often not regular business hours. Business owners often spend business hours working in the business, and off-hours working on the business.
• numbers. Small businesses have books to balance, and scarce capital to monitor. If they’re not getting a positive ROI on something, they’ll probably bail and focus elsewhere.
• help. Small businesses are burdened with demands — cash flow, health care costs, red tape, complicated tax laws, hiring and keeping the best people, and finding and keeping their customers. They seek value and simplicity to balance this all. Can you improve the bottom line and make things easier? You win.
• to be a part of something. Business owners are the rock pillars of many communities, physical and virtual. They see themselves as the leaders upon whom this great country depends. They are generally pro-market and pro-freedom, but they believe in collective action to improve conditions for everyone. Are you a part of their communities, too?

SMB is the engine of America’s economy, responsible for more than 90% of private sector employment. Like America’s population, they’re diversifying rapidly, but some things remain the same. Including this: Your business can’t serve SMB as a side project. It requires understanding, focus, the right products, and unequivocable value.

Media isn’t magic.

Oh, it used to be. Magazines, television, movies – these were immensely complicated endeavors crafted by brilliant alchemists in Hollywood and New York.

Today, the product is still great, but the magic is gone. A program about LA doctors may be shot in Vancouver, edited in Korea, promoted on MySpace, and distributed over Hulu. We don’t watch the news; we watch Jon Stewart complain about the news. And because seeming half of all media is dedicated to reporting on the half, we know there’s always a man (or Oprah) behind the curtain, even if we can’t see them.

It wasn’t always such. Check out this clip from WCIX (Miami’s channel 6) in 1984.

Besides the quaintness of the reportage and the nostalgia for radio’s not-quite-golden age, what’s most astonishing is the assumed naivete of the audience about the media business:

“Your ratings are what determine the amount of money you can charge an advertiser for being on your radio station. Obviously the more popular your station is, the more expensive it’s going to be for the advertiser.”

Got that?

Today’s teenager is probably more media savvy than 1984’s college graduate. And that savvy, compounded with an unfathomable choice of media platforms -– from YouTube to IMAX to On Demand to NetFlix to Xbox Live to… um, books? –- has made all of us more demanding, less loyal, and more skeptical. After all, if we don’t like what’s on the screen, we can make our own show. The long tail isn’t just getting longer, but it’s getting hard to distinguish the head.

And now, we’re all in on the joke.

A few weeks ago, I noted Lufthansa’s inexplicable decision to promote its very expensive business class service by handing out gummy, shrink-wrapped “croissants” with intimidating wholesale-style labels.

This a morning, a street team was standing outside the Montgomery BART station handing out foil packets of something called Propel, as well as stacks of coupons to buy some.

What is Propel? Damned if I know. The street team didn’t provide anything to explain what the product is supposed to be. Here’s all I could tell from the package:

• “Propel Powder Packet”: Okay, it’s a packet of powdered… something.
• “Vitamin Enhanced Water Beverage Mix”: I’m supposed to add it to 16.9 ounces (!) of water and “SHAKE GENTLY”
• It’s made by Gatorade, and contains “natural berry flavors.”

OK, I think I get it. I’m supposed to go buy a bottle of water and then dump this in it. It’s going to make the water taste like berries and deliver vitamins. So this is like Vitamin Water mix? Is it a sports drink? Is it sugary, low-cal? Is it meant to get me through my office work day, or replenish me after a workout?

All of this would be nice to know.

There’s also this issue: San Francisco is a green town. Only one product comes in 16.9-ounce servicings, and that product is now as politically incorrect as baby seal bacon. The $0.99-off coupons may be applied to a purchase of the bottled version of Propel, which looks exactly like bottled water.

Here’s probably what happened: The Propel brand manager budgeted for a street team to get samples and coupons out to active, urban populations. They didn’t really think a lot about the details, besides maybe how and where to maximize the distribution.

Here’s how they should have managed it:

• Educate: They handed me something non-obvious, without explaining what it is, why I would want to use it, or when I would want to use it. Instead of a coupon, they should have introduced the brand and especially the product.
• Entice: What’s motivating me to go through the trouble of mixing this with 16.9 ounces of water? Especially since I don’t know what it is, and if I don’t like it, it essentially ruins the $1.50 bottle of water I ostensibly bought.
• Position: Like most San Franciscans, I’m disgusted by our stupid everyday reliance on bottled water. Cleaner water comes through our taps than what’s contained in plastic (an oil product) and trucked in from municipal sources. Instead of positioning itself as an accessory to my bottled water lifestyle, Propel could position itself as a green alternative to products like Glaceau VitaminWater. After all, you can mix Propel with your filtered tap water, instead of buying “enhanced” water that’s trucked in from elsewhere. This would speak to eco-conscious urban dwellers.

Street teams have value. But so do planning and executing the promotions in ways that appeal to your potential customers. That takes forethought.

Also from yesterday’s FT-sponsored Financial Services Marketing breakfast, Richard Waters dropped these Six nuggets of received wisdom that have been discredited by the financial meltdown.

• Stocks go up 10% a year. So what if you’re going to retire in a few years? Why miss out on more gains by preserving your savings in boring CDs and bonds?
• You can beat the market. Just ignore what Bogle and his adherents have been proving for years. Cramer will get you your returns.
• House prices only go one way. Waters told a story about a fight he and his wife had after a real estate agent in Marin tried to convince them of the truth of this. Fortunately for the Waters’, he won that fight. Millions of others were not so smart (like Suzanne’s hapless clients. What? What?).
• Financial innovation is good for you. Forget about how Orange County went broke investing in these newfangled “derivatives.” Go ahead and bet the whole financial system on incomprehensible instruments. It’s science, people!
• Big banks can’t go bust. They’re way too diversified, right?
• You can’t go wrong giving your life savings to a middle-aged white guy. Especially if he’s named Madoff or Stanford. Interestingly enough, this seems to describe the staff of the FT.

Killer quote from the Financial Times‘ veteran financial reporter Richard Waters, at yesterday’s (4/22/09) Financial Services Marketing breakfast, sponsored by the FT. (Great event by the way.)

“People say we are in challenging times now. And I think it’s obvious that ‘challenging’ hides a lot of sins.”

Challenging, and sinful, times indeed. What’s been most disgusting about this global downturn is that it’s turned our world upside down. Entities and enterprises that seemed beyond reproach and the envy of the world are now disgraced by their own failure and corruption. And the catechism of our markets has been proved a lie.

Next post: Six nuggets of received wisdom that have been proved false.

Two weeks later, almost everybody still hates Facebook’s redesign, which tossed aside algorithmic relevance in favor of immediacy. Even Facebook employees reportedly don’t like it. Many of my Facebook contacts have said or implied they’re visiting less.

Relax, says Slate’s Farhad Manjoo. Users hate every site redesign. And then they get used to it. And then they forget how the site used to look.

That’s usually true. But sometimes sites redesign themselves out of relevance. (See UrbanBaby for a recent example.)

I don’t think Facebook’s redesign has doomed them. It’s still a fun and useful utility with impressive network effects, and high switching costs (the prospect of re-setting your network on another service). To their credit, they’ve demonstrated nimble action on user revulsion towards past initiatives (Beacon, or their recent ToS changes). And they’re demonstrating again that they’re going to restore some of what this last redesign destroyed.

But what’s most galling about this Facebook redesign – as well as the Beacon and ToS fiascos – is what it says about the immaturity of Facebook the company. In spite of 175 million users, it acts like a trailer-based startup. It doesn’t understand that its every move has consequences, and recreating its primary product is serious business.

Did they do any bucket testing? Did they get feedback from their power users? Did they revise, re-test, try to make sense of how their changes would impact user behavior? Or did they just feel some Twitter heat and decide they want to be like that?

At this point, the evidence strongly favors the last conclusion above. CEO Zuckerburg now famously told his employees that “disruptive companies don’t listen to their customers,” which is such a wildly false assertion that his board (he has a board, right?) should give him a little ass kicking.

For the record, I don’t hate the new Twitterish look of Facebook, although I find it less useful than the version that preceded it. And Twitter feels clunky and faddish. Nobody should be in a rush to copy it; they should be in a rush to improve it radically. (Wouldn’t be hard.)

Mostly, I’m just shocked how Facebook treats its product like it’s still in alpha, and its customers like they just need to shut up and go along for the ride. This is how you kill the goose before it even goes golden.

Unless you have a private jet and you can avoid the scrutiny of Congress, you probably hate airline travel.

Brand gurus claimed years ago that airlines were in the “happiness business,” because vacations make people happy. But airlines, of course, make their money from business travelers. And business travel always sucks.

So let’s say you’re the agency managing the campaign for Lufthansa Business Class.  In an environment that’s disastrous for travel budgets, it’s hard for a potential business traveler to get an employer to spring for a ticket to Cedar Rapids, much less one to Europe in business class.

To sell business class in this environment, you need to sell the bottom-line benefits:

• Face-to-face contact is important in this economic environment, and will even give you a business advantage over your competitors who have become more “virtual” to lower costs.
• Lufthansa Business Class knows Europe better than anyone, and it will get you to your ultimate destination very quickly and conveniently.
• Lufthansa Business Class will keep you productive while you’re in the air, if that’s what you want
• Lufthansa Business Class will also make your business trip successful by bringing you to your destination relaxed, rested, and prepared

Here’s what you don’t want to do: Remind people why they hate to fly.

And yet that’s what Lufthansa did yesterday morning. As I blearily climbed the BART stairs en route to work, a young street-teamer handed me a paper bag with “Breakfast to go,” courtesy Lufthansa Business Class brand on the bottom. In the bag was a mock boarding pass and this monstrosity:

Yes, a gummy-looking, shrink-wrapped mini-croissant with wholesale packaging labeled “2413 A | Butter Croissant Mini 1.25oz IW.” In other words, exactly the kind of crappy “breakfast” that sours you on flying coach. If you were served this starch-puck on a Lufthansa Business Class flight from SFO to Berlin – which runs in the neighborhood of $3,000/seat on weekends or $10,000/seat on weekdays – you’d probably be rather annoyed. Even furious.

Even for free, I wouldn’t eat this.

Marketing a luxury product in hard times can be tricky. Maybe the street team isn’t always the way to go.

Google announced today that as part of their growing push into display advertising, they’re finally going to target users instead of sites. Google calls this “interest-based” advertising, and they intend to run it as a beta test through AdSense.

Google has been a laggard in behavioral targeting, on one hand because of a simple lack of capability, and on the other because of the deserved scrutiny they’ve received for their dominant market share in both search and display advertising following their DoubleClick acquisition.

Yahoo and others have been doing BT for a while. The skyscraper ad you see embedded to the right (click on it to see the whole thing) is one that rendered for me today on Yahoo’s IM web client. How did they know I wanted to go to Kauai? Because I searched for a vacation to Kauai (from San Francisco) on Orbitz a couple days ago.

The secret sauce, Google claims, is that users will have control over the buckets in which they get placed, once they find the Ad Preferences tool. But how will users know the tool exists? A user can also opt out of targeting, but this requires them to find the Google Ad Privacy Center, or to install a browser plug-in if they clear their cookies frequently.

That said, ad privacy is something that primarily riles people up in theory. Sure, maybe you’re uncomfortable with ad networks tracking your sites, but when you see an ad that interests you, do you really feel violated? Making a user feel okay about being targeted – especially microtargeted – is all in the execution. Transparency looks good in press releases, but most users will never set their preferences, or even know the settings exist. So the targeting must be subtle, the messages must be relevant, without being over-personalized.

If you over-personalize, or if you make the targeting too obvious, you get the in-your-face iris-scan Hell of Minority Report. And nobody wants that.

I’m tweeting like an angry canary these days, mostly with links to the most interesting stuff I’m reading.

Check out my Twitter feed, if you dare.