Greg Krehbiel on Publishing and Online Marketing

On top of all the other bad economic news, the postal service is about to raise its rates, which is going to have a very bad effect on lots of companies. It might put some out of business.

So what’s the solution? Is it time to de-regulate the mail?

I know some people think mail is antiquated and should go the way of the whale harpoon and the gas street light, but the truth is that lots of businesses still rely on (and profit from) mail. And the truth is, sometimes printed stuff is better. I’d much rather browse a printed Lands End catalog and then place my order online than suffer through browsing their web pages. Direct mail is still useful stuff, but the postal rates are out of control.

Greg Krehbiel Uncategorized What do you think?

I’ve posted a few times here about the problems with display ads and ideas about ways to measure their true effect.

Part of the problem is that web designers marginalize them — quite literally, by lining them up in the right column — and people have learned to ignore them. If you look at those funny charts that track where people actually look at websites, you’ll notice that people avoid the ads.

But ads have some effect. The problem for the advertiser is in figuring just how much.

It’s easy to measure a click, but very few people click on ads.

So the folk who sell ads have come up with a new metric. They want you to measure the effect of their ads based on views, because studies have shown that people who see an ad are more likely to type in your URL or search on your brand terms. IOW, clicks underestimate the effect of the ad. Hence the “view-through conversion.”

But there is no such thing as a “view-through conversion,” there’s only a “display then convert.” Attributing a conversion to the fact that the ad was displayed is a leap of faith. The person might have responded to some other marketing effort.

So how do you test the real effect of the ad? Clicks undervalue them and “views” overvalue them.

The first requirement is that you have a defined audience.

I’ve had countless conversations with ad salesmen who try to tell me they can test the effectiveness of their ads by comparing the people who see the ad with the people who don’t see the ad.

I often wonder if these people failed elementary school math.

The effectiveness of an ad is measured as a percentage — total sales divided by the number of people promoted. Many systems can distinguish “conversions from people who have seen my ad” from “conversions from people who have not seen my ad,” but in order to get a useful percentage they have to also tell you how many people were in both groups. And they usually can’t.

This means that the first step in measuring the effectiveness of display ads is to define the size of your test groups. There may be other ways to do this, but the way I chose was re-targeting.

In a re-targeting campaign, the universe is defined by the number of people who visit a site and get the re-targeting cookie. The sequence goes like this. A person visits your site and gets the cookie. He visits some other site in the ad network and sees your display ad. He comes back to your site and buys something, and the conversion tracking on your “thank-you” page shows a success.

To test if display ads really work, here’s what you need to have.

1. a defined universe that you can divide into subgroups — like people who visit your site.
2. a way to divide that universe into subgroups and treat the subgroups differently — i.e., display ads to one group and not the other.
3. a way to track conversions and map those conversions back to the subgroup.

Re-targeting is the perfect way to do this. First, you put a re-targeting cookie in the browser of all the visitors to your site and put conversion tracking on your “thank you” page.

Then you set up a campaign. Half of the people who visit your site go out into the wide world and see ads to bring them back. The other half of them see some irrelevant ad, like a public service announcement.

This kind of a test allows you to compare conversions in the group that saw the ad against conversions in the group that didn’t.

I recently did such a test and found that the group that saw the ads converted at three times the rate of the group that didn’t see the ad.

This tells me that I can value 66% of all the view-through conversions.

IOW, let’s say I do a re-targeting campaign where group A sees irrelevant ads, and group B sees ads designed to bring them back to my site. 100 people from group A convert, but 300 people from group B convert.

That tells me that 100 people were going to convert anyway, but that the ads brought in another 200 conversions.

So 2 out of 3 of the conversions in the “they saw an ad” group can be directly attributed to the effect of the ad.

Greg Krehbiel Uncategorized What do you think?

At the SIPA Washington conference I heard some interesting comments about how quality free content is a gateway to paid content.

Miles Galliford said that in a session on “developing online communities” and one of the other speakers said similar things in a general session.

And it seems to make sense — as if there’s a funnel of engagement, from stranger, to some level of awareness, to website visitor, to “registrant” or other form of free content user, to paid customer.

But I also had some hallway conversations with marketers who said that their lists divide quite neatly down the paid / free divide. IOW, the people who download free stuff don’t pay and the people who pay don’t download free stuff.

So which is it? Or does it vary by market, or by industry, or by the type of content you’re discussing?

One possibility is that when people download free stuff they give you their garbage email address. We all have one — the “give away” address that we never really use. And then when we want to do something serious we use our real email address.

If this is true (and I’m only mentioning it as a possible explanation), the same person might be downloading the free stuff on his crapmail address and then purchasing on his realmail address.

Just a thought. Any ideas?

Greg Krehbiel Uncategorized What do you think?

Zuckerberg has said that he’s building a new web where “the default is social,” and new Facebook apps are bringing that to life as they pop up on other sites. Those apps allow you to see what other people say about the site, or whether any of your friends like it.

We are witnessing a fundamental change in the nature of the Internet and how people use it. At one time the internet was about technology and information. The geek who could trick the search engines got all the traffic and most of the ad revenue.

The search engines responded by changing their algorithms, and there’s been a “who’s the better geek” contest ever since.

But now the internet is becoming social. That’s the driving force behind Facebook’s success. But it’s not so much that the web is social. People are social, and the web is catching up.

I’m more inclined to believe something from a friend than from a stranger. I’m more comfortable taking advice about my car from the mechanic I’ve used for 20 years than from anybody else. (Note: “social” doesn’t mean “free.”)

This is the challenge for publishers. They need to be like my trusted mechanic. Some people say that when they buy their groceries they prefer one cashier’s line. They like that particular cashier. IOW, there is a social element to the marketplace.

Publishers can’t only be about information and data and products. They need to establish a relationship with their customers.

Greg Krehbiel Uncategorized What do you think?

News has gone through a few interesting changes over the years. Papers used to be openly partisan — supporting a political party or an ideology. Then we had the growth of organizations that claimed to be dispassionate and objective. The “independent” newspaper. Of course they never really were objective, but they tried.

Now the news business is going through its most serious challenge. Readership is down. Classified ad revenue has gone to Craigslist. Many people don’t feel they need to subscribe because they can read the content online for free, and online ads don’t compensate a newspaper for its costs.

The result — there will be a weeding out process over the next few years as superfluous news organizations go under.

Also, technology has exposed an ugly truth about news content. It’s basically all the same.

A long but interesting article about how Google is trying to save the news business (see How to save the news) highlights this through the inside perspective of a guy who helped run Google News — which, as you know, aggregates stories from thousands of different news services.

This aggregation provides an opportunity to compare news stories on similar topics, and apparently they’re just not that different, no matter which source they come from.

That could be the result of journalism training, or a journalism culture, or any number of things, but the bottom line is quite clear. There are too many outlets offering essentially the same content, and there’s no reason to purchase an article from one paper when you can get the same thing for free elsewhere.

This will doom any effort to put newspaper content behind a pay wall.

… however … a paper might be able to charge for access to content that is unique. The Wall Street Journal does okay with its paid model because it’s considered essential to business.

The conclusion is that the future of news is in niche marketing — i.e., stories written from a particular point of view for a particular audience. That helps the news organization in two ways: (1) the consumer might be willing to pay for such content, and (2) advertisers are willing to pay a premium for access to a niche audience.

Greg Krehbiel Uncategorized 1 comment

At the coffee pot just now I was speaking with a colleague about an old Starbucks drink called chantico, which was a very rich, very strong, very sweet hot chocolate drink.

It was delicious, but you could only drink one every other week or so if you wanted to live until next month.

They discontinued it after a short while, and I had always thought people simply didn’t like it. But just now I googled it and found this old article, which claims that chantico died because the customers couldn’t customize it.

Starbucks seems to appeal to the kind of personality you really don’t want in a spouse — i.e., the need to have things just the way I like it.

Now they’ll have to factor that in to new product launches.

So beware! When you give customers endless flexibility, it takes away some of your options on the product development side.

Greg Krehbiel Uncategorized What do you think?

Some publishers are making big news these days by deciding to switch from an ad-supported model to a paywall — where visitors have to pay a fee for access to content. I don’t think it’s a good idea.

To oversimplify things, there are two kinds of content.

1. “Commoditized” content — i.e., stuff everybody else has, and
2. unique content that has a special voice/perspective, or added value.

Generally speaking, you can only charge for #2. Also, generally speaking, it seems that most content providers who think their content is unique are kidding themselves and have been listening to too much of their own rhetoric.

Internet behavior for the last decade has made it pretty clear that customers are quite willing to make do with somebody else’s version of a story if they can get it for free.

But — as Rupert Murdoch rightly says — free isn’t a sustainable business model for a newspaper. That is, if by “free” you mean trying to support your business with display ads.

Newspapers thought they could just move their ad-supported print product into an ad-supported online product, but something happened on the way to the 21st century. Craigslist, Monster, eBay and so on stole a lot of the newspapers’ traditional sources of revenue, and consumers suddenly had access to papers from all across the world.

A few papers have been able to charge for access. The Wall Street Journal can get away with it because of a perception that its coverage and perspective is need to know for business.

The same can’t be said for The New York Times or The Washington Post or any number of other papers. Articles on the Icelandic volcano aren’t even a dime a dozen.

Rupert Murdoch is betting that Times Online is unique enough that people will pay for it. See Is Times Online Doomed After It Starts Charging Users?

I think he’s wrong on this point.

So if the ad-based model isn’t sustainable, but nobody is going to pay for access to a newspaper, what’s a publisher to do?

The challenge is to tie news to some other product or service people are willing to pay for.

Here are a few mutually non-exclusive ideas.

1. Tie content to an extended ad for a single product.

Web site designers have trained people to ignore ads (which are conveniently grouped into a column so they’re easy to avoid), and this is part of the reason why ads don’t work very well. Site designers and content creators need a different model.

Without turning the content into an advertorial, a publisher could find a product that’s closely related to the content and give it extended and exclusive coverage on the page. An obvious example of this model is a book review with a link to buy the book, but there are other options. The content provider could monetize this any number of ways — sponsorship, CPM, CPA, etc. But the key to success would be a very aggressive campaign to find a niche product that closely relates to each piece of content. The idea is to ensure that the people reading the article are the type who might care about the product.

2. Use the content to encourage signups for a free email and sell to the email list.

Under this model there are no product ads on the page. The content is simply a draw for prospects for a related email list, and that’s where the selling is done.

3. Create free and premium versions of a story.

A news organization could use a mass-market story as a loss-leader for some truly unique content — a related tool, special report, form or checklist. For example, a free article about retirement could have links to a for-pay retirement calculator.

Note that the premium content does not have to be online. It could be a print subscription or a training video.

4. Require registration for access to content and collect demographic data on your users.

Targeting is big in advertising, but in order to get demographics on site users the publisher needs to track their behavior, and in order to do that the user has to sign up. A popular way to get sign-ups is to require registration to comment or post a question. (IMO a publisher should try to use openid rather than creating their own registration system. As a web user I find it annoying to have to create a new id for each site.)

The key to this model would be really good tracking. What kinds of articles do people read? Which ones do they like and dislike? Which do they comment on? Which commentators do they follow? That’s valuable information to advertisers.

5. Re-think the concept of a newspaper.

The newspaper used to be the one-stop shop for news, funnies, ads, sports, style, etc. It’s simply not that way any more, and content creators need to adapt.

Now people go to Drudge, comics.com, craigslist, espn, glam, and so on. Newspapers have tried to re-create the paper online, and the effort has failed because the web has atomized all interests.

Perhaps it’s time for each content creator to be a profit center. Maybe the book reviews aren’t on the paper’s site — they’re on Amazon. And maybe the foreign affairs writer has a blog.

The bottom line is that publishers can’t force consumer behavior to accommodate the publisher’s broken business model. Content has to learn to pay for itself in a new market.

Greg Krehbiel Uncategorized What do you think?

I can understand when a pre-teen thinks that the price of some product should be calculated by an equation that includes the cost of making it plus a small profit. I can’t understand when a grown man falls for the same blunder.

The price of something is set by the willingness of the consumer to pay. The consumer doesn’t give a whiff what it cost the manufacterer to make the thing. (It cost just as much to make the CD that’s languishing in the dollar bin as it cost to make the best-seller that’s $20.)

Newspapermen seem to think that consumers care about their cost of production. I think they’ve been attending too many union meetings.

For example, listen to this.

Gathering news costs money, sometimes a great deal of it. Mr Brown presumably does not expect Marks & Spencer to give away its clothes and food, so I’m not therefore sure why he thinks newspapers should give away their journalism.

(Source: Stephen Glover: The future of the free press will rest on Murdoch making us pay.)

I suppose that gathering perfectly round pebbles exactly 2mm in diameter is costly as well. So what? The relevant question is whether people are willing to pay for it.

The thing is, I agree with Rupert Murdoch that “free” isn’t a sustainable business model for newspapers. But I don’t believe paywalls are the answer. There are other ways to monetize content. (In fact, I believe that will be the subject of my next post.)

Greg Krehbiel Uncategorized What do you think?

Publishers can’t get enough revenue from ads to support their efforts, so some of them are turning to paywalls as a solution. The logic is “we are losing money so you have to pay us,” as if the publisher’s business model is the consumer’s problem.

I think it’s misguided, and so does Ashley Friedlein in this interesting interview. (HT @epubsforum.)

Some content can be sold, some can’t. Regular news can’t.

Greg Krehbiel Uncategorized What do you think?

Had an interesting chat with some folks from PointAbout yesterday about iPhone development and the future of mobile.

They say that if you want to go mobile, you should focus on the iPod/iPhone for now. Blackberry is too fragmented, with each different type of device using a different operating system or browser. And since the iPad can run iPod/iPhone apps, focusing on the iPhone is the closest thing to one size fits all.

In app purchase sounds like the way to go for ecommerce. It sends a payment through the person’s iTunes account, and can be used for on-going purchases — like monthly or annual subscriptions.

The down side is that Apple takes 30% of every sale. The up side is that it’s incredibly easy on the user. He already has all his billing information set up with iTunes, so there’s no (additional) concern about security. I don’t know if the publisher gets the purchaser’s information. If not, that would be a big strike against it.

Appmakr.com is a simple way to create apps for the iPhone from any RSS feed. It costs $300 / app and looks very easy.

I have a hard time believing that magazines will do very well on mobile — at least not in their current form. The interface is going to have to change. I don’t suspect people will want to page through an online magazine the way they do in print.

I suspect the best place for content providers to get into mobile is in tools, reports and calculators.

Greg Krehbiel Uncategorized 3 comments