Friday, September 29, 2006

Internet & Marketing investments

Ok the post i'm gonna do is quite ambitious for me. I think i'll update and correct it several times.

To try do to relevant things, i'll start to say that it mainly concerns Marketing investments for Internet companies : as Yahoo!, Kelkoo, Msn, Myspace, Google... In few words, companies which do Internet as core business. This is my vision of Marketing in 2006 just before to have my new courses with Mr Julien Levy (writer of Mercator and also director of my master program at HEC)

Let's dissociate 2 parts in the Marketing :

. The Product design/conception (Marketing in the product/service).
. Marketing actions as acquisition/loyalty for the product
(Marketing around the product/service = Messages).

1. Marketing in the product (conception) :

It's the way to design the product/service taking care to his market keys factors of success.
This in order to propose a solution answering to the target needs and to generate value.
From my side : Myspace.com is the best example of excellent marketing approach in the product conception. All features and options which make the product success are activated by default. We have to know that 90% of users never change default configuration of the product.

On the Internet, this part is mainly manage by US where the product is developed. That's one of the things i've understand at Yahoo!, it's seems to be worst at Google and MSN.

On several products, the marketing approach of the conception is suffisant to recruit users massively. For example, Myspace.com is recruiting 250 000 news users with a 0$ marketing budget, simply by the velocity (viral marketing) of the product.
Be careful it's not a promotion action, viral marketing is not a campaign (which is more buzz marketing), the virus is the product, not a message around the product.

The web 2.0 (defition : "content produced by users" and not by the web platform editor anymore or for some others : "value generated by users" cf Olivier Ezratty), which is characteristic of the product, allows (in addition to not spend money on content production) to let the users make the promotion of the product (mostly not the company role anymore). This fact is huge to reduce marketing costs and companies have to include this logical in their web product / web services ! (when it's relevant and possible).

Most of the time, FR marketers don't believe in that, i've understand that it's caused by the fact that they don't manage the product so this fact maybe doesn't valorise their expertize :)
Basically, for many web marketers, you need to spend millions of euros to recruit millions of users. I hope it will change, but some of them seem to be so brainwashed by their "consulting" & communications agencies that they can believe that myspace need to buy Skyblog to generate value in France...

Quite different of the viral marketing, you have the network effect which is simply buzz i think. I'm not sure to be able to explain the exact difference now, maybe my binomial Carl will try to do it.

The brand definition is also very important in the product/service's conception. Sometimes you need a strong brand like Yahoo! but not in the case of a product based on customization & personalization the brand have to be less important to let user at the first plan.
"Myspace" defines more each member's space than a strong brand. And it has to be like that.

One more thing linked to the product but which is linked to promotion too is the On-network Marketing. It's the art to promote the product on the product and it's pretty relevant when the company have several services or products in the same Network. (example on Yahoo! Portal : ads to promote Yahoo! Music on Yahoo! Mail). Yahoo! it's the most advanced company on this expertize and i was in charge of it for France as On-network Marketing Manager.


2. Marketing around the product (promotion without ability to change the product)

I'll start to list all kind of marketing actions :

. Off-Network Marketing :

> SEM :
> SEO :
> Affiliation :
> Partnership :
> White labels
> Banners campaign
> Mini sites
> Distribution (more business development than marketing) :
> Address location
> Barters
> PR
> Events
> TV ads
> Print ads
...

. On-network Marketing :

> Banners campaign
> Network integration (promotion of a product B on a product A)
> In product actions (to develop product usages)
> Newsletter

Only the relevant ones have to be used to promote your product/service.

Let me take an example,
Kelkoo has never invested on KK brand, cause if you look at the way people are buying products on the Internet :

a. First they tape the generic name of the product in their favorite search engine
b. Find the product with the best price on a e-commerce site after comparison.
c. Buy it

> Most of the lead realized on shopping engine as KK are buyed by KK...

Shopping engines have to buy most of the traffic cause it's seems to be impossible to gain customer loyalty. So all actions related to brand marketing will be ROI negative. But SEM, SEO ,Whites labels, Partnerships are pretty important to recruit users and marketing teams have to develop ROI methodology to ensure that they are not buying the traffic more high that KK will be able to monetize it.

Yes for me, on the Internet, no reason to define Marketing as cost center. We can make it generate direct financial benefits.

Track Costs, Track Revenues, Test almost all available solutions, Learn, Optimize ROI, only invest on ROI positives actions.

Try to be 100% Objective.

8 comments:

Vincent said...

This post gonna be interesting. I'll follow your thoughts buddy.

I agree with you, that most of the marketers are too much focused on keeping the same technics and apply them on the digital channel.

That's why I strongly believe that Internet companies are interesting to analyse. So I gonna read you eheh.

See ya

Olivier Ezratty said...

I'd add on your marketing definition of Web 2.0 that users not only promote the solution through viral mktg, but they also add value to the product itself. This is not necessarily new to so-called Web 2.0 (Amazon and eBay have a lot of service value created by users), but has been amplified by this phenomenon. Folksonomy, social shopping, blogs, etc, are all about user-created value. Sometimes, there's a strange mix like with video publishing. The majority of content on YT and Google Video is pirated video, and less than a couple % of user generated video. But the small % can have great value if well organized, tagged and promoted by users themselves, like Web content is promoted on Digg.com.

Gregory Talon said...

Hi Olivier,

In fact, my defition of web 2.0 is just "content produced by the user". I think the main evolution is here. The fact that the user promote the product was more a results related to marketing problematics, not the definition.

I'm seduced by your definition : "value created by the user" that's right, as you said, that's not new.
So i'll add it to my post cause i think it's relevant. Specially when we think to YT.

Thanks for your comment. Tell me what you think of the article! It will be pretty interesting for me.

;)

Olivier Ezratty said...

I’d make the following comments to your text :

- Virality is applicable to both content generation and awareness generation. But in different manners. On content generation, it’s a win-win game like the one you have with open source software. People add value because they know they’ll get at least the same value in return. If the product/service is designed to that it’s easy to create value, and you get some recognition for it, and it’s easy accessible/browsable, then you drive this network effect.
- User generated value is a very interesting business model. It explains why some Internet companies, whether 1.0 or 2.0, drove so crazy valuations. They had a mix of user generated content and viral adoption with low capital invested. And preferably, but not always, a good balance sheet, improving with volume. If you take Digg.com, Wikio, eBay, whatever, most of the value creation is done by users. The Internet company is a broker, a facilitator to this value creation. When I look at startup business models, I always try to understand how the company will drive users to create this value and create a “multiple” of value vs invested capital. On value creation, one good reference to understand how it migrates from player to player : “Value migration” from Adrian Slywotzky.
- French traditional “brick and mortar” companies have not understood that phenomenon. Particularly because this model requires a strong openness in communication and connection with customers. See a very good book on this: “The naked corporation” from Don Tapscott.
- True, most American companies centralize their R&D in the US. But that’s not always the case. First, they have to localize content, and it requires local skills, even if it’s outsourced directly from the US and not from the country’s company subsidiary. Second, depending on the local leadership, some local initiatives can happen. That was the case with my peers at MSN when I worked at Microsoft. They had some influence on product design, and even piloted some new products in France. My experience is that folks in large subsidiary have a lot of potential and skills to offer to their American collegues. When they do that well and mix their convictions with a strong network of connections, their leadership can have a strong impact on product design in the US. Not easy, certainly, but possible to achieve definitively.
- On marketing as a cost center, the Internet has changed a lot : you can measure a lot of the ROI of your marketing investments and quite easily correlate it to your revenue. So, it’s easy to invest in marketing, measure it, tune it, and drive revenue creation. That is way more difficult with traditional products marketing, particularly brand awareness marketing (with broad reach advertising where you can’t count eyeballs and qualify or even collect identity of your potential customers).
- By the way, sorry to be rude, try to spellcheck and grammar check your text. It sometimes really looks like word to word translation of French idiomatics.

Cheers,

Olivier

Gregory Talon said...

Thanks Olivier,

I see we're sharing the same vision on most of the points. I'll complete my post with your comment to improve it during the week-end.

I'll add just one thing.
It's easy on the concept to deploy the ROI methodology on marketing actions.

For example :
It's easy to generate value on SEM Yes! cause it's just the difference between the bid and the rate-card.
But to maximize the ROI you've to do at words level, not campaign one, it's more complex.

But SEM it's the most simple case.
It's not technically easy to track costs & revenues in real time for each lines of a Off-network Media plan.

It's not easy to deploy "usage tracking" instead of "download tracking" across the promotion of a messenger...

Then sometimes we forget to integrate some costs in the ROI Calculation.

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Anonymous said...

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