The Next Version of the Internet

This is an effort to organize and clarify my personal thoughts on the next stage of the web. This initial article is a high level overview; the next few articles will deal with specific areas like retail, entertainment, banking, education, etc. I believe we are moving in this direction fast and already have most of the technology needed to execute this new vision of the Internet. To be clear, I’m not remotely the first person to think this way, so you may have run across these concepts before. Would love any feedback on where you think things are going.

 

The Next Internet

I believe that the Oculus launch has effectively spawned what will become the next version of the Internet. And games like Second Life foreshadowed it. Currently we access the web through a flat monitor that conveys a 2D world on a small screen in front of our faces. We ignore everything around us and use what I believe to be primitive (non-native) actions to affect changes into that world (the keyboard, the mouse, and even the finger swipe, although it is closer to natural).

The next version of the web will be a 3D world that effectively replicates and hopefully improves upon reality. At a high level, I think we’ll login through goggles (like Oculus), using our irises and likely wear apparel loaded with sensors to give us a natural feeling of being in a new world. There is the possibility that cameras (like we current game with) could convey movement and action into the world, but (as I discuss below) they would miss out on critical details, so I don’t think they are the best solution. In this world you would be depicted as an Avatar of your choosing and would interact with the Avatars of other humans and bots. Oculus is starting with movies and games, but someone is probably now working on a live world that allows you to move, interact and transact with other humans, bots and businesses. Once this is launched, people have computers strong enough to login to it, and it functions well, I think the current 2D web will become a ghost town. Why? Being in a virtual reality world feels more real, more natural than our current web experience. It is paradoxically, more innately human than our current ways of going online. The transition is unlikely to go slow after it catches on.

This new version of the internet would solve lots of issues while creating as many new problems. At a high level, it would enable us to interact in a personal way with others, bringing us back to conversations instead of text and, if the system is sensitive enough, would allow body language and facial expressions to function much as they do in the real world. On the negative side, we have to figure out ways to differentiate reality from a 3D world that functions in most of the ways you need (both will be forms of reality). It has to be materially different in order for our minds to continue separating our physical lives from our online lives. In some ways, the new internet would replace reality, but in others it would be very dangerous to mix the two; e.g. you can theoretically be protected from or live through a fatal fall online, but you can’t IRL.

 

AOL surges back

AOL was the introduction to the web for many a Gen Xer. It was a safe, contained space that allowed you to explore controlled content and slowly figure out how to use and benefit from the internet. I believe that one company will create the next version of the internet. Facebook/Oculus seems like an obvious choice with an advantage, but it is not a foregone conclusion that they do it. This world will be more like AOL in that it will launch as an effective monopoly over the new internet.

This is not only likely, it’s necessary. Rules will need to be established that determine how we can act in this new space. Change is likely to be rapid and someone needs to have enough control to adjust the rules or rewrite them as needed. Avatars will be created and have to be depicted within the world. And trillions of interactions will have to be managed within this cloud space. I think the initial direction of this new world is likely to be heavily influenced by whomever creates it. If a gaming company creates it (which is an obvious possibility since they have lots of experience with MMORPG), it’s likely to allow combat and death of Avatar. If Facebook launches it, it’s likely to start focused on personal connections and relationships, maybe even with inAvatar chat rooms. But no matter the start, it will quickly move to encompass what humans enjoy and want to accomplish.

The initial rules should be somewhat related to the laws of physics (you can’t walk through walls), but with critical exceptions (ability to instantly move to another place).

 

Conceptual Ideas

Several ideas have floated around suggesting organizing concepts. Early concepts suggested the idea of rooms or buildings that you move between in a ‘telepathic’ way. In Snow Crash, Neal Stephenson imagined a long, long street. In Ready Player One, Ernest Cline imagines a planetary concept. The key is creating a theme that can expand rapidly, accept a multitude of cultures and goals, and quickly be understood by newbies. The long street concept has several flaws, the biggest being a lack of organization – at least as I’ve heard it depicted. The planetary concept is nice, because it has little theoretical limits and can allow for differing rules on different planets.

Conceptual frameworks to build around:

  • Street
  • Cities
  • Islands
  • Planets

A lot of these are executed the same way, but planets have a nice crisp border that helps to clearly define rules and experience. In addition, planets can be themed or planned around an organizing concept. This adds clarity and ease of use. For the creator, planets offer leasing opportunities to profit. A ‘shopping’ planet could be leased by retailers building stores.

Side note: conceptually, planets can be personalized. This would require significant more computing power, but changing the planet based on the person would improve usability. It would, however, make for oddities in a world where other people are seeing something different than you. Perhaps some planets would be personalized and you only come in contact with those who are seeing a very similar planet to you. I think this could happen, but this personalization is more likely to happen inside of a room or building, rather than over an entire planet.

 

Technology

The technology to achieve this is, for the most part, available. We’re just reaching the point where this is doable. First, cloud computing is a necessity for this: it requires heavy use of computing power to render millions of Avatars in a world setting. There are three pieces to this: large computing power in the cloud, huge pipes to stream down to a localized computer, and very fast local computers with a ton of memory to support rendering of this world. Building the technology to render is complicated, but delivering it real time to end users (high speed architecture) is at least as hard.

Second, a tool like Oculus is required. It’s the new interface between you and the web. And the completeness of a three dimensional world is what makes this more familiar and believable to our minds. We accept it as a version of reality, rather than a fake interface.

Real time translation is somewhat available, although not as accurate as we would like. Initially we’re likely to see cultures and languages pool together online, but eventually I think the concept of differing languages will wash away. You’ll hear everyone in your native tongue. Culture is harder and probably requires a piece all its own. In short: as the world homogenizes in many ways, people will hold on to key aspects of their cultural heritage as a way to define them (online and off). But even this is likely to muddle when people choose to incorporate other cultural tokens that they associate with. Online, it’s hard to tell the affected from the real.

The piece that’s not quite available yet is sensor technology that measures our movements. Think haptic gloves and apparel that can tell when you hold up your arm. As I said earlier, I don’t think cameras (like current gaming consoles use) are ever going to be as accurate as apparel for rendering this world. Fitted clothing can detect tiny movements in muscles while also measuring heartrate, sweat, etc that help the virtual world really understand your present state. Facial expressions, however, are likely to be measured by camera over apparel. And I think these cameras will be built into the glasses in the future for just such a reason. Allowing our Avatars to express emotion makes the world more real and becomes necessary for such an all-encompassing solution. Probably not in the first version, to be clear, and I think there should be a debate about the value of letting people hide emotions versus react. Although, I think the ultimate control goes to the user; who will have lots of customizations available whether we all agree or not.

 

Conclusion

For now, I think this is an initial start. It’s more interesting to delve into how this changes the internet and our physical worlds. And I’ll get into that in my next post. I’ll try to incorporate links below to the other articles, so that they all tie together.

What does the Safe Harbor Legal Ruling mean for Marketers?

As a guy who straddles the line between technology and marketing, this is an interesting week. If you haven’t heard, the European Court of Justice struck down the Safe Harbor agreement from 2000 that protects your ability to move data from the European Union to the U.S.  A lot has been written about how this affects IT or big cloud companies, but not a lot about how it impacts marketers. Well it  definitely has an impact on you. And the ruling affected the agreement immediately.

In essence, it means that marketers on the whole need to get smarter about technology and understand it much better. This is my legal take on the Safe Harbor ruling and it’s written in my layman’s terms. If you do business in Europe or pull data from Europe to the US (including for employees), you need to call your attorney today and figure out what is next. You need a legal opinion that you can stand behind.

Here’s my initial take on some of the ramifications:

  1. Big versus small. This ruling seems aimed at Facebook, Amazon and the other big players, but it actually impacts the small guys in a much more meaningful way. The big guys have data centers in Europe and already have some legal protections in place for what they are doing. The small guys don’t and will need them fast. It also impacts the costs of expanding into Europe for marketing teams – additional safeguards on data will be required.
  2. Data streams. Suddenly marketers need to understand their data flow. Where “in the cloud” are you storing data? The key question is around European privacy. If you’re taking data that can identify a person in Europe and moving it to a cloud service in the US or to your servers, this ruling impacts you. You’ll need cloud services that store data in Europe and some safeguards that keep personally identifiable data from flowing to the US.
  3. Lawsuits. The door is now open to lawsuits from EU residents who feel you are not protecting their privacy. US laws are very lax on privacy whereas the EU takes it very seriously. So far, US companies have been able to ignore EU privacy laws for the most part, that is not true post-ruling (until a Safe Harbor 2.0 gets nailed down).
  4. Protections. Again, this is my opinion and I am not an attorney. Talk to yours. Here are some ways to try and protect yourself from this ruling:
    1. Require EU users to agree that you can transfer their data overseas. It also helps if you have a rational need as to why the data is transferred, e.g. we ship from the US, etc. This is a good way to protect yourself for ecommerce retailers.
    2. Use one-way encryption algorithms to encode the data and dump personally identifiable information. If you don’t need to identify the specific person, then don’t. This way you can continue to use data for analytics and modeling, but you protect yourself from privacy lapses.
    3. Model Clauses. This is the way big guys deal with it. Talk to an attorney.

I’m hearing two things: small guys feel like they will never get noticed or they haven’t even heard of the Safe Harbor ruling. Both are dangerous. My understanding is that any E.U. user can file the lawsuit that causes you problems. So being small isn’t a big protection if you’re doing business in Europe.

I recommend at a minimum that you take the time to write up a legal blurb that says “if you click this button, your data will be used in the United States” etc. And understand why you need the data here. If you’re collecting a lot of E.U. personal data, I recommend figuring out your data flows and making sure you keep the E.U. data in the E.U. unless you have a clear, documented rationale why that won’t work.

More to come in the next week as attorneys start parsing the ruling and its ramifications. On a side note, we need to push the U.S. to get the Safe Harbor 2.0 done, so write or call your congressman. Rumors are that it is delayed over access to data by U.S. government groups. That’s frankly ridiculous in my opinion.

Have I missed something? Or stated it wrong? Please let me know in the comments.

2015 Christmas: Another Year of Heavy Discounts

Consider this a prognostication on the future. Translated: my best guess with a bit of intelligence thrown in for good luck.

I’m taking what is actually happening in the economy and going to the logical conclusion for this holiday season (to be more politically correct). Here’s a few key data points to start the discussion:

All in all, I think we’re shaping up for a tough Christmas season. The combination of high unemployment and low wage growth typically results in lower consumer spending. Add in high inventories at companies and I think you’ll see a brutal season of markdowns and less-than-ideal margins on the retail side of things. This will add to the downward pressure on spending (people are saving the extra money, not splurging at this point) and creates a downward cycle.

How are you planning your 2015 holiday sales? Heavy on discounts? Big sales gains expected? I’m curious where business are planning because they have the best intelligence on what is happening now. But my economic look into the future seems to indicate heavy discounts and less spending.

Reuters has an interesting article on retail sales projections here.

The Death of Banner Ads – and the Implications

Right around the corner we have iOS9 (just ask Siri for a hint). And with it we get Apple’s adblocking technology. At first blush, big deal, right? But after looking under the covers, I think it’s going to be a very big deal.

First, a little reality for you: banner ads are not effective advertising. Agencies keep selling them and ad buyers keep buying, but the real data is monstrously bad. And there’s a reason for that: (a) most banner ads aren’t visible by humans; (b) visible banner ads are ignored by 82% of the people that might see them; and (c) Most banner clicks are accidental (especially on mobile). All of which leads to horribly bad recall, low interaction and a lack of value in banner ads for marketers and consumers. Including the accidental clicks, the click-through rates tend to be less than 1 per 1,000 viewers. That’s insanely bad marketing spend.

However, banner ads do work in certain instances, mainly around retargeting. If a user visits your ecommerce site then goes to the WSJ or a blog, it’s worth targeting them. Because they are familiar with your brand, they tend to have more awareness of the ad and click through rates are higher. So the modern marketer can use banner ads for other things than burning through all that pre-IPO, pre-revenue cash. And on the other side, they provide content producers with a critical stream of revenue that helps keep content free. Would your favorite blogger work as hard without some ad revenue to make him feel like it’s worthwhile? (Obviously I’m the exception, I don’t make a freakin’ thing on this blog).

Saying all of that, iOS9 only impacts mobile usage, so this doesn’t mean instantly banner ads go to zero. And it needs to be utilized by end users, which will take time. However, marketers need to get ready for ramifications of this change, which I think will be huge a year from now. Here are some conclusions I’ve drawn about what it means to block mobile banner ads:

  • Eventually it means the death of the banner ad as we know it. Mobile is rapidly gaining share on virtually all sites. If you aren’t at 50% of visits now, you’re probably close. This could quickly wipe out half of ad impressions available outside of bots (e.g. non-human viewers) and make 0.06% click through rates look impressive. In the short term, it probably means increased cost per view with lower inventory.
  • It drives up the value of content to marketers. Instead of placing banner ads, we’ll look to place inline content on blogs and heavily trafficked media sites. The banner ad budget might transition more into something like a PR/media campaign aimed at getting space on targeted blogs. And this likely means paid placement along with a content creation budget.
  • Ironically, this isn’t likely to have much impact on sales for ecommerce players. In order to make banner ads look like they are driving sales, you had to do analytical gymnastics with the numbers. All it impacts is those questionable awareness or engagement numbers that implied you were hitting 70% of the target market. Hell, it might make you more profitable.
  • It’s also likely to move banner ad budgets more toward social media. Facebook and Twitter are apps that can find a way to fit and pseudo-target your population. They will become the de facto place to drive online awareness through a mobile device. There are very few ad-friendly other places you’ll be able to find folks on mobile.
  • For content producers, it may lead to app creation and even charging for content. You’ll have to be very good to get folks to pay, but I could see building out an app that can circumvent the ad blocking technology. I’m still thinking through this angle.
  • And, of course, it supports Apple’s new News app, which isn’t likely to have issues with blocked ads. These ads are not nearly as targeted and only for large marketers (read: rich marketers). It isn’t a cheap place to show up, which helps with the brand value of the marketing, but makes those that calculate cost per click very uncomfortable.

Online advertising is moving more and more toward creating branded experiences for your most loyal fans. Immersive sites that entertain as much as they educate will continue to drive visits, awareness and affection toward your brand, which hopefully results in sales. But I think we need to start thinking about a post-banner ad world and how we drive traffic through content.

Banner ads have long been the most pathetic form of online advertising. Bad creative around jumping monkeys or deceptively concealed ads don’t help anyone. Consumers hate the retargeted ads that follow them around the internet. So I’m not sure we lose a lot in throwing out banner ads (except for the publishers, of course). But I think we do need to rethink how to recreate our marketing campaigns without the ad spend toward banners. Search can’t soak up more dollars (everyone is maxed out there). It has to be good creative and good content that can be repurposed across key websites.

Do you agree? Also see Doc Searl’s take on adtech here, which I appreciated.

How I see the World (or Winter is Coming)

One of my side-obsessions is investing. I actively manage an IRA and investment account with my personal money in it, so I’m always trying to look into the future and figure out where we’re headed. Good investing is akin to be a good fortune teller (and has about the same level of accuracy). So I’m writing up my thoughts to increase my personal discipline when it comes to thinking through investments. This is just a start and the big picture view:

Right now the world is awash in debt. Over the past few decades we’ve seen an enormous increase in global money supply and in debt. At the same time, we’ve developed this faith in central banks to remove any negatives from the business cycle and constantly fix any problem that pops up. The world is not okay. I see three big problems all starting to collide in 2015 and I’m still reconciling where the fallout lies.

PROBLEM 1: DEMOGRAPHICS

My marketing work lies in demographic analysis, so this is close to my experience. People drive the economy. This is very visible in the US, but look at Japan as the prototypical example of this issue. When your population stops growing (e.g. people aren’t reproducing above the 2.1 kids necessary to grow the population), then the population ages. As people, we spend money in very similar patterns over our life. Young people buy much more stuff than old people, generally speaking. Young people create inflation, old people create deflation. There’s a lot more behind this assertion, but at a high level it is true (mainly because young people take on debt, old people pay it off). Japan has had to print money like a counterfeiter at Rio’s Carnival to keep their economy afloat. In normal times, this would have resulted in massive inflation. Because of their demographics, it hasn’t. But that leads us to the second problem (which Japan has) …

PROBLEM 2: SOVEREIGN DEBT

The latest numbers I’ve seen show the world debt levels (not just sovereign) at around $200 trillion dollars. Way, way above just 10 years ago. In the U.S., we admit to around $18 trillion dollars in debt (the last two presidents have both doubled the debt while in office), but that’s ignoring our implied commitments (social security, etc) that are likely two times this. Across the world, debt levels are out of control. I don’t have an economics background (which seems to be an advantage), but I’m not sure how countries can continue piling up debt with no remote plans to slow down or start paying it off. Japan is interesting to watch as they, seemingly without any concern, print money as fast as they possibly can. When does Japan become the next Greece? And how long will people continue believing that sovereign debt is risk free? There’s a Lehman moment coming and that concerns me. Also, I believe that the first two problems lead to the bigger issue, which is problem number three.

PROBLEM 3: SLOWING WORLDWIDE DEMAND

Debt slows an economy when it hits a certain GDP level, which I believe we have achieved in the US. In addition, too few young people reduce the need for things. Combined they result in a slowing demand for goods and services that has a rolling impact on the economy. I believe the disaster in commodities is the first place you are seeing this lowering of worldwide demand. This issue is tightly tied into the two problems above and leads to deflation. That’s where I think we’re going: deflation. Because of China’s massive building spree, we have too much production capacity across the world and not enough demand for products. The hope was that China would convert to a consumption economy and pick up the slack from slowing US growth. Clearly that hasn’t happened and I still believe China is essentially hitting a hard, hard landing. There is no country (I see) that has the growth to potentially pick up the baton. And I think the US is borderline recession at this point.

CONCLUSION: DEFLATION

In the end, I think we’re headed for tough times worldwide. This is a global debt hangover that makes our 2008 mortgage disaster look like a mild cold. In terms of investing, I’m long on the dollar (safe haven), short the Chinese market, short the Yen and actually short gold and silver (deflation pull is stronger than their safe haven pull). I also expect the S&P, NASDAQ and Dow to have significant corrections this year, so I’m waiting for a good chance to short those markets (only corporate buybacks are holding them up at this point).

So this is a summary of where my head is at this point. For the past two months I’ve done extremely well with my investments and I think the short-term outlook is good. Long-term I’m still trying to figure it out. But I’m worried. I can’t help but think: Winter is Coming.

Other random predictions:

  • Oil will be below $30 in 2016. Might hit $30 by the end of this year.  And won’t hit $100 a barrel for at least two years.
  • Telsa, Amazon, Twitter and other companies that have huge valuations but virtually no profit (social media) are great short opportunities. But so far I haven’t jumped in.
  • Europe is in worse shape than it appears. I think the Euro falls below parity with the dollar in early 2016.
  • Bonds are a disaster. I think we’re already seeing a move to quality investments and junk bonds are going down fast. I keep thinking I should short Spanish and Italian sovereign bonds, but I haven’t done it yet.

I’m curious as to your thoughts. Feel free to comment below.

Memories of ringing the NYSE Bell

My grandfather was as blue collar as you get. He worked in an Atlanta Ford plant his entire working career – and not in an office. A good man who worked hard and took the lessons of the depression seriously. He saved a lot and invested over and over in one company (Southern Company) which had a cyclical stock. When he died he left his children a sum far above that expected from a blue collar guy. When I think of ringing the bell at the NYSE, I can’t help but think of my grandfather who probably never imagined me being there. He would have loved these memories.

Professionally, this is probably one of the things I get asked about the most. Mainly people wonder what the exchange floor is like (small). Or how the pomp and circumstance plays out (more casual than you think). I have a few extremely distinct memories: standing by the bull (you know the one), being amazed by the technology throughout the exchange, having a huge breakfast, and the moment when we (by that, I mean Teavana’s CEO) rang the bell to open the NYSE. But it was more than that and this is my attempt to detail what happened and how I remember it. This is a personal recollection and I’m not sure it’s valuable for anything more.Our Ritz hotel room

Teavana went public on July 28, 2011. The prior day we flew up and stayed at the Ritz Carlton Battery Park with rooms overlooking the Statue of Liberty. Each room included a telescope for a better look at Lady Liberty – and New Jersey, of course. That night we had a great dinner in a private, second-story room at Megu in Tribeca. The food was good and the restaurant seemed perfect for an Asian-themed retailer to go public. They had a cool ice Buddha sculpture that was changed daily. I particularly remember the Sake and enjoying a fun night with co-workers. That night our CEO announced the higher-than-expected price we were going to launch TEA at. It was fun all around.Megu Ice Sculpture

The next morning everyone woke early and headed over to the NYSE. I walked over with David Staels, our VP of HR, and we made a point to walk directly past the bull. I remember being energized and very excited. The NYSE was adorned with Teavana banners and featured a geisha out front performing the Japanese Tea Ceremony and serving many cups of Teavana matcha.NYSE Teavana launch

One funny story: early in the history of Teavana, we used a specific Japanese model as a geisha in what became an iconic Teavana image. Our CEO tracked down the model to use as the geisha in our NYSE activities. We assumed she knew how to make matcha (it’s not that difficult!). However, when she arrived we found out fast that she wasn’t a tea drinker at all. So she was given a quick lesson in matcha and the Japanese tea service on the morning of our public launch. It worked out great, but you’re never prepared for every eventuality.

Once inside the NYSE, the technology is what struck me. Walls were covered with screens that branded the NYSE and offered information to guests. It’s an old building, but the rebirth of the NYSE as a technology-first company, where the technology is maybe the only thing that matters, really came across. We still think of the NYSE floor as the center of the financial world, but it’s the servers that do the actual work. The floor isn’t pure drama and acting at this point, but it’s also not a necessary component of the NYSE’s trading. That revelation stuck with me going forward and has become more true over the years. How long will people continue coming to ring the bell?NYSE from Bell Ringing Balcony

We started the day with a great breakfast deep inside the NYSE. The room featured a mock Teavana tea wall along with a massive breakfast table. It was a nice meal that ended with the president of the NYSE offering a plaque to our CEO as a reminder of the day. Then, right on cue, we all walked up a hallway to the small balcony where the button to ring the bell is located. It is an actual button that theoretically kicks off the market activities for the day. CNBC was broadcast into our offices back in Atlanta so the rest of the gang could celebrate with us. I stood on the left side of the balcony right behind our SVP of Stores and we were told when our CEO was supposed to push the button. We stayed for a few minutes after and then walked down to the floor.NYSE Small Floor

I’m sure you’ve heard this before, but the floor of the NYSE is very small. It seemed smaller than the room we had breakfast in, but of course it wasn’t. It was much smaller than it looks to me on tv. I was told this repeatedly before going, but I can’t emphasize it enough: that floor is small. We walked down stairs onto the floor and waited near a terminal to hear where TEA (our ticker symbol) would begin trading. It took longer than I expected for us to get the first price, but it was interesting watching the guys in the blue jackets do their thing. It made me think of the old market makers on the floor actually conducting the business in a crazy environment. The floor activities still seem the same: guys yelling what sounds like prices and participating in an event that has driven the world for a long, long time.Trading TEA

Eventually, the floor trader looking at our position turned and announced TEA’s opening price. It was significantly up from where we priced the stock (everybody prices too low these days). Good news all around and a hell of a way to start a day. I think at this point I was half giddy, half dazed and maybe a little amazed at the overall event. We walked out of the relatively dim floor into bright, sunny daylight in lower Manhattan. After ringing the bell, we took pictures in front of the NYSE and walked over to the bull. We also took pictures there, but found out later that the enterprising artist expects a payment if those pictures are used in public way. So I’m not sure where they ended up.bull

It was a pretty amazing twenty four hours in NYC that I’m not likely to forget. And going from a private company to a public one is a pretty significant shift in all things; it was transformational not just personally, but professionally as well.

Afterwards, we enjoyed NYC for a bit and then headed back to the airport towards Atlanta. My grandfather had passed away, obviously, before my voyage to the NYSE. But what I wouldn’t give to have a conversation with him about it. It would have meant so much to me.

Hope you enjoyed my thoughts. Not too detailed, but fun to remember!

The B2B Miss: Ecommerce Excellence

B2B ecommerce is an interesting conundrum. It has the ability to both cut expenses and drive up sales, however it rarely gets the funding or attention needed to succeed. There are exceptions of course, like Staples, that understand the massive value capture that can be made with a solid ecommerce presence. However the development of a B2B ecommerce site usually falls not under marketing, but under a sales executive, who has no experience in driving ecommerce in a way that really gets to the value available.

On the buyer side, B2B ecommerce is in high demand. Business buyers shop online in their personal lives and are very comfortable with it. In fact, research here and here (as examples) show that B2B buyers are digitally moving through the sales funnel without assistance from salespeople more and more. Sales is focusing on closing (as they should) but if your digital isn’t doing the work, you’re missing out on long-term growth opportunities. Add to that the ability for digital to personalize, which translates to upselling and cross-selling to your buyers. This drives real value that is difficult to get through a salesperson in 2015.

The world is moving and many, many businesses are missing the boat.

What is the problem? As I mentioned above, a lot of times the problem is in the structure of the company. B2B sales is under a sales team and lead by an executive who doesn’t really understand why marketing matters. But ecommerce strength comes from marketing, not sales, and requires an experienced marketer to do well. In order to excel, a business needs to bring in the skill set from outside and give them the support they need. Which takes us to the second problem: money.

It takes investment. In a time where we’re cutting costs left and right, investing in a strong ecommerce platform seems expensive. Isn’t it just exchanging one channel for another? In my experience, a good ecommerce and digital marketing arm can give you a significant lift in sales from your current customer base in addition to cutting costs over time (typically you can reduce customer service and sales team members with a good ecommerce presence). The initial bump is seen from your smaller or less important customers, because they aren’t getting the sales attention they need now. But even the bigger guys will respond as well.

Finally, the single biggest problem is that B2B executives often don’t realize the potential value of ecommerce in their business. It takes real digging to understand the costs of taking an order today versus taking one online. And it takes experience to realize how digital marketing can lift sales; e.g. why the investment should be made. This is a cultural shift in the company and a political problem over and above the first two issues. It’s more likely to change due to competitive shifts or threats than it is due to a lightbulb going off in someone’s head. Unfortunately, that means a lot of businesses are going to be eaten alive in the new digital world. That’s already happening now (taxis, department stores, even cigarettes are being eaten by digital) and will continue to happen. Is your industry next?

My recommendation is to bring in talent and invest in the plans. Early on focus on email and paid search to start supporting your sales them. Then add ecommerce and make it world-class instead of focusing on reducing the investment. Long-term it has a massive payoff for most companies. It won’t save a company with poor products, but it absolutely can drive good product to the next level. Your customers are shopping online just as they do at home. You should be there to meet them.

 

Life as a Juggling Act

Presented without comment:

“Imagine life as a game in which you are juggling some five balls in the air. You name them — work, family, health, friends and spirit … and you’re keeping all of these in the air.

You will soon understand that work is a rubber ball. If you drop it, it will bounce back. But the other four balls — family, health, friends and spirit — are made of glass. If you drop one of these, they will be irrevocably scuffed, marked, nicked, damaged or even shattered. They will never be the same. You must understand that and strive for Balance in your life.

How?

Don’t undermine your worth by comparing yourself with others. It is because we are different that each of us is special.

Don’t set your goals by what other people deem important. Only you know what is best for you.

Don’t take for granted the things closest to your heart. Cling to them as you would your life, for without them, life is meaningless.

Don’t let your life slip through your fingers by living in the past or for the future. By living your life one day at a time, you live all the days of your life.

Don’t give up when you still have something to give. Nothing is really over until the moment you stop trying.

Don’t be afraid to admit that you are less than perfect. It is this fragile thread that binds us to each together.

Don’t be afraid to encounter risks. It is by taking chances that we learn how to be pave.

Don’t shut love out of your life by saying it’s impossible to find time. The quickest way to receive love is to give; the fastest way to lose love is to hold it too tightly; and the best way to keep love is to give it wings!

Don’t run through life so fast that you forget not only where you’ve been, but also where you are going.

Don’t forget, a person’s greatest emotional need is to feel appreciated.

Don’t be afraid to learn. Knowledge is weightless, a treasure you can always carry easily.

Don’t use time or words carelessly. Neither can be retrieved. Life is not a race, but a journey to be savoured each step of the way…”

–Brian G. Dyson
Coca-Cola Enterprises President and CEO, during a speech at the Georgia Tech

Ecommerce Acquisition: Where do customers come from?

I talk a lot to B2C ecommerce folks, both small and big. And one of the most frequent questions I hear is something along the lines of “where should I be getting customers?” Sometimes this is asked about a specific channel (should they be xx percent of acquisition?) and sometimes about the whole (how do I get more free customers?). But it’s asked a lot.

There are guidelines around B2C customer acquisition that are reasonable across most industries and most target markets. However, I would preface the discussion by saying these are averages. And like the average human, they don’t really exist. Virtually no one will fit comfortably into this breakdown, since everyone does something a little better/worse than others. However, how you fit (or don’t) will tell you a lot about your business.

Here’s what I’ve seen:

Tactic % of sales Comments
Paid Search 20 – 30%  
Organic Search 15 – 25%  
Email 15 – 20%  
Display 8 – 15% Can be higher for high margin businesses. Includes retargeting.
Direct Traffic 8 – 15% Wide variability based on offline marketing & brand strength
Affiliate 3 – 11% Trending down as affiliate loses its luster
Marketplaces 4 – 9%  
Referral Traffic 3 – 7%  
Social Media 0 – 2% Can be slightly higher, but rare

 

Almost everyone has at least one exception to this. First, Display, Affiliate and Marketplaces don’t exist for all ecommerce folks, but you can remove them and disperse their percentage over the rest. Second, retailers with strong offline marketing (commercial TV, direct mail, etc) are likely to have higher Direct Traffic and search numbers.

Other thoughts:

“FREE” Marketing: One of the biggest problems is when Free Programs aren’t making up enough of your sales. I use parenthesis around “FREE” because these all require effort and costs, but you don’t pay by the customer typically. Organic Search, Email and Direct Traffic need to push close to 50% of sales in order to help pay for some of the other programs (particularly if you’re doing Display). This is probably the number one issue I see with struggling retailers: they are paying too many tolls on their customers.

The Paid/Organic ratio: A related problem is around Paid Search versus Organic Search. Logically, these programs are in competition with each other. They are very tied together, but almost never make up the same amount of sales. I’ll commonly see a Paid Search program that makes up 30% of sales connected with an organic program that makes up 6% of sales. This means you need to work on organic. They should be closer to one another, however they rarely are very close. Google now takes up 90% of the above-the-fold space on the search page with paid ads, so Paid typically dominates by about 500 basis points.

Content marketing: Content drives the free programs, so good content can pay for itself fast (and keep giving over time). The move for ecommerce guys towards content is really a move to capture more sales through Organic, Email, Direct, Referral and Social traffic. If those five are all hurting, it’s likely more a content problem than a technical issue.

Social Media marketing: Social will not be a huge part of your sales. Yes, there are stories of ecommerce plays that do very well through social media marketing. Typically these are targeted at very young people and are very small businesses. For a medium-sized business, social is a customer service arm and an awareness play. Note that the one exception to this tends to be Pinterest. Pinterest doesn’t consider itself a social media website; they believe they are a search and shopping site. This is much more accurate. Good, helpful content on Pinterest can drive your social numbers up. But they are still unlikely to get to 5% of sales. Very unlikely.

Hopefully this is helpful. If you’re willing to share how you differ from the above, I’m glad to give you my two cents as to why you likely differ. Reach me at jay [.] m [.] allen [at] gmail. Leave out the brackets.

Digital Marketing for B2B: Where to Start?

Trends tend to move from consumer to B2B over time and digital is no exception. B2B customers are, after all, consumers at home and now enjoy the luxury of knowing or ordering or managing anything, anytime, anywhere. And, as Kevin Hillstrom points out, digital hates inefficiency. So B2B marketing is seeing inefficiencies in sales generation driven out using digital techniques.

These changes have been weaving their way into the B2B world. First, B2B buyers began doing a lot of research before they ever called a sales guy. Who wants an hour long conversation if the tool won’t work anyway? So more and more content was added to B2B websites – including pricing information – that was not contemplated just five years ago. And once the buyer informed themselves before ever contacting a sales rep, sales became all about closing the deal. Sales salaries moved over to website content and marketing funding. You started seeing more power in the marketing departments, particularly in digital marketing, alongside a slippage of power in the B2B Sales departments. And I think that trend is increasing.

Along those lines, B2C marketers have had more opportunities to grow into B2B arenas over the past two years especially. But where to start in a B2B environment? Is it much different than B2C marketing? The answer is yes and no. Yes, it’s definitely different and some things just won’t work. But it is getting more and more similar to B2C than it was years ago. Here are the tactics that work:

Content. B2B requires even more content than B2C marketing. White papers, conference sessions, webex, etc. A lot of this is taking what works in B2B sales and making digital versions of it. A webex after all is simply a sales call that reaches hundreds of potential candidates rather than one at a time. One benefit to B2B content is that it typically lives a lot longer than content on the B2C side. This helps to justify the expense and makes it easier to tie back sales over a cycle.

Lead gen. B2B marketing is not about closing the sale. It’s about generating leads and pushing those leads down a funnel that ends with a sales call. Lead gen fills the top of that funnel and generally starts with paid search followed by sponsorships on other websites or email programs. Organic traffic is key to keeping your costs down and also helps justify the content expense. But paid search is just as important in B2B as it is to B2C marketers.

Email. This is the big gorilla of B2B online marketing. Although it contains a component of batch-and-blast or seasonal marketing strategies, what really works is marketing automation through email. Something Salesforce + Pardot has done extremely well in recent years. Your site should be geared toward lead gen and once a lead is collected, it should be segmented and fed a continuous stream of targeted email content that moves them down the funnel. This is true online sales programming and it widens your sales funnel.

Tracking and data analysis are also just as important in B2B as B2C. And, in my experience, B2B marketers don’t yet have all their leads tied back as cleanly as they do in B2C, so there’s an opportunity to be better than the competition here.

In terms of online marketing, here’s what doesn’t work (and the exceptions to the rule):

Banner ads (not including retargeting). Banner ads continue to get a bad rap for good reasons. Sales practices around them are questionable and their efficacy is as well. It takes a huge marketing budget to really use these effectively and they are hard to justify in a true B2B sales environment. The one exception is retargeting ads, which are focused on known prospects. Note that this does not include sponsored ads in targeted emails, which can work well for B2B marketers. This is specifically around doing large banner buys through an agency targeted at a specific demographic group.

Social media (except LinkedIn). When folks interact with social media, they typically do it as a consumer. It’s about interacting with friends, not shopping for brands. Unless you are targeting a very young demographic, it’s difficult to find value in paid social advertising. The one exception is LinkedIn because it’s unique status as a professional forum. I have seen good, effective advertising that is very, very targeted here. Don’t do this without someone who knows what they are doing.

Affiliate. Affiliate is always attractive to sales folks because of the nature of the offering: you only pay when you get a sale. It really doesn’t work well for B2B (and I would argue that it’s questionable for B2C as well). Don’t spend time here.

That’s my high level list of what works and what doesn’t. If you need to start fast, start with Paid Search and email. If you need it cheap, start with email and written content, then kick on Paid Search once the funnel is working. Email tends to make all other marketing activities look more profitable and more effective, so I always recommend it early in the process. A lot of B2B strategy is figuring out how to lead a prospect through the sales cycle without a sales person. And then keeping them informed into the future.

Good luck!