Starting Up by Rahul Pathak

I just got back from the Facebook Developer Garage in Seattle. These are local events started by a local sponsor for people interested in Facebook apps. There were a handful of people from Facebook including the Senior Platform Manager who spoke.

Overall, a really interesting event. Some of my impressions:

• Facebook is an incredible phenomenon - 33 million users, adding 100,000+ every day.
• The platform is real - 2000 apps in 2 months. 75% of active users have at least one app installed
• The talk is “open platform” but Facebook is in charge. They throttle things like invites and the number of notifications apps can put in the mini-feed (1 per user per day.) Like any other application built on a free api - you have no rights. You get what you pay for.
• Lots of Ruby developers in attendance. Probably the single largest group which is sort of crazy in Microsoft country.
• Virtual currency and Ad Networks are interesting right now. However, money is changing hands across Facebook apps. They’re encouraging more app developers to seek to get outside ad dollars into Facebook.
• Top app is seeing $20 CPM; $5-10 is more reasonable.
• Engagement is the key metric. Pageviews/user, repeat visits, time on site. People are more focused on raw numbers right now.

I think the talk about engagement is critical. Anyone will try your app once. The key is how often they come back and actually use your product. This is something we’re very focused on at Judy’s Book. Unless people are choosing to opt in to the experience you’re creating after their initial trial, you’re nowhere.

There’s an interesting article in the WSJ today (As Costs Rise, Whirlpool Makes a Dent in Dings By Ilan Brat) about the cost of damaged inventory vs. the cost of packaging.

Basically, appliance manufacturers have been finding ways to trim the cost cardboard and foam used in packaging their products. Sort of makes sense - thin margins, competitive business, every penny counts. The only problem is that a machine is handled so many times before a customer sees it that the risk of damage is high. One ding leads to a return which wipes out any savings.

For decades, manufacturers have worked to reduce the cost of the cardboard, plastic and foam that protect products. But companies like Whirlpool in recent years have realized that how products are packed and how they are handled during shipping need to be looked at together, says Ralph Rupert, director of a packaging center at Virginia Tech in Blacksburg, Va.

“Why try to reduce my packaging spend half a percent, when if I just keep one product from being damaged, I’ve paid for weeks worth of packaging goods?” Prof. Rupert says. Americans bought $22.4 billion of major appliances last year, according to the NPD Group, a market-research firm in Port Washington, N.Y.

What I found particularly cool was how this problem was being tackled. In what might be perceived a low tech industry, Whirlpool is using a supercomputer and modeling techniques to simulate loads and test solutions.

After setting up a computer model of the process, the engineers discovered the clamp trucks sometimes were squeezing the washers too tightly, says Mr. Yates. They also found that the lower corners of the machines were bearing a disproportionate amount of the force.

The company got new, taller clamps with firmer metal to help distribute the force better. They changed the packaging, adding a sturdy cardboard beam across the machines’ tops to ease pressure on the lower corners.

“It’s not intuitive that you would put something on top to protect the bottom, but it works,” says Mr. Gielda. In the three months after the packaging design changes were implemented in the fall, damage rates on the washers and dryers declined more than 80%, saving millions of dollars, he says. “It was a big wake-up call for the supply chain,” he says.

It’s easy to get so caught up in optimizing a particular aspect of your offering that you lose sight of the big picture. You have to step back every now and then and make sure your priorities are still the right ones.

I was at the Apple store in the U-district last week and had picked up the Sims 2 Pets Expansion pack (a great gift for the Sims addict in your life) and was waiting in line to pay. As usual, it was impossible to leave without playing with the iPods and lusting after the Macbook Pro, but my favorite part of the experience was being approached by a sales rep with a wireless credit card reader who came to the back of the line, asked if anyone was waiting to pay with a credit card. 2 minutes later, I was on my way out of the store.

Hats off to Apple for caring enough about the customer experience in their stores to make sure that you didn’t wait in line if you didn’t have to. I’m not surprised they have better sales per square foot than Tiffany’s.

But here’s a little-known fact: Apple’s chic stores don’t just sell more per square foot than even Best Buy, they beat some of the best in the luxury retail world silly, according to a report released Tuesday by Bernstein Research analyst Toni Sacconaghi.

Apple’s stores have hauled in annual sales per square foot of $4,032, compared with Best Buy’s $930, Neiman Marcus’ $611, and luxury store Tiffany & Co.’s $2,666, according to Bernstein.

As Mark Hurst has said (and I paraphrase), customer experience is the sum total of interactions that a consumer has with your brand. On that front, at least for me, Apple has done a phenomenal job.

According to this Comscore report, (thanks for the pointer to this Garth) Ebay is the largest SEM marketer on the web with 800+MM exposures and which represented 4.1% of the total (March 2007 data). It makes sense that their decision to pull advertising on Google made Google blink.

In March, paid search activity in the U.S. generated nearly 20 billion total sponsored link exposures. The top ten paid search advertisers, generating 16 percent of all sponsored links, were all retail or comparison shopping sites. eBay.com led with 802 million sponsored link exposures (4.1 percent), followed by Smarter.com with 366 million (1.9 percent), and Shopping.com with 357 million (1.8 percent).

Ebay also owns Shopping.com which is also an SEM Monster.

There’s a great, raw post on learning from failure at Raganwald that talks about “inventing a great solution to a problem no one cares about…” This is something which is all too familiar to a lot of us. It is definitely possible for something to be really cool and for nobody to give a damn. Mid-way through the post, there’s a section on selling that really resonated with me.

But something I learned from selling Macintoshes back in the day is this: only make one sale. Convincing someone they have a problem is one sale. Convincing them you have the solution is another. And convincing them that today is the day to act is a third. If you have to do all three at the same time, you are doomed.

This is why experienced companies distinguish sales from marketing. The first two steps are marketing, the third is selling. When you are a new company, you don’t have the resources to market and sell. You have to work with an established pain point (eliminating the first hurdle), then use PR and limited marketing funds to get the word out that you have solved the problem (the second hurdle). You only have time and energy for the third sale, separating customers from their money.

Changing behavior is really hard and whether you’re selling software or convincing someone to use your website, having to make multiple sales just compounds your problem. If you’re not alleviating pain, it’s going to be a tough slog.

Last night, I attended a panel discussion on Web 2.0 marketing where Derek Gordon (VP Marketing, Technorati) had this awesome sound bite:

“Our ad server, Doubleclick, just got bought by Google; our most popular content, YouTube, is owned by Google; most of our referrers come from Google; Wow, I’m Google’s…you know. Doesn’t feel so good when you don’t own stock.”

And my second favorite quote:

“I don’t think there will be a Web 3.0, I think there will be a Mobile 1.0. If you want to see the future, go to South Korea and hang out with a 15 or 16 year old. Not in a creepy way…”

Derek had the crowd laughing out loud multiple times over the course of the night. If you ever get the chance to hear him speak, I highly recommend it.

The panel as a whole was targeted at brand marketers who were new to social media, so content was around “participating in the conversation” and “being authentic.” While none of this was news to those of us in the sector, I always enjoy hearing people’s perspectives firsthand.

Mike Murphy - VP Media Sales, Facebook

• “75 years ago, people were buying and selling from people they knew. Let’s hope we haven’t forgotten how to do that” - On social media & e-commerce
• “Web 2.0 hates advertising but if you can make an offer part of the experience - sort of a membership has its privileges - you can make something happen.”
• “Yahoo, AOL, MSN & Google control 97 cents of every dollar on the web. OK, maybe it’s more like 96 cents.”

Ben Elowitz - Co-Founder and CEO, Wetpaint; Co-founder Blue Nile

• “If you stand for everything, you stand for nothing.”
• “When people want to go deep, they want to interact with like-minded people; niches are important.”

 Norman Guadagno - Chief Marketing Officer, ZAAZ

• “This is a partial attention economy. Ignore him, listen to me.”
• “Don’t stick funny videos on YouTube if they are not going to meet your business goals. What is your business goal? How does your viral campaign help that?”

Derek Gordon, VP Marketing, Technorati

• “People are hitting ‘Publish’ before they proof-read…that’s why it’s so FUN!”

Mark has a great post (read it - good info in the comments too) about building for the long term interest of the user. Couldn’t agree more:

In other words: a strategic focus on creating a good customer experience - that is, acting in the long-term best interest of the customer - is the most effective investment any team or company can make.

The benefit of a customer experience strategy, by the way, is made stronger by the relative lack of companies that use such an approach. Many companies - most of one’s competitors, in other words - still chase after short-term numbers by latching onto buzzwords, trends, and anything shiny.

At Judy’s Book, on-site customer experience has two main dimensions*. One is the quality of the site, how easy it is to navigate, how well it serves the user’s need, and the second is the content quality. If users are on beautifully designed pages that are easy to navigate, the content still has to be high quality. Managing content quality isn’t glamorous, but it has to be done. If anything, success only raises the burden here.

Improving the site flow and focusing on value to users requires keeping it simple, but not dumbing it down. One approach mentioned in the comments on Mark’s blog is essentially layering - keep the functionality, hide it from inexperienced users, but allow people to discover it over time. I agree with this approach - having a product that doesn’t do anything isn’t useful, but you can’t overwhelm new users with features. Also, keep out the things that aren’t relevant to the user problem you’re trying to solve.

As Mark suggests, focusing on improving customer experience with your product (and your company) is hard and requires persistent effort. I do think the rewards are worth it. I just wish the long term would get here sooner.

*I realize Customer experience isn’t just a function of the product, but also of how you interact with the customer on support emails, phone calls, complaints, etc. In this post however, I’m only addressing the product piece. Ultimately, every interaction someone has with your company adds up to define their perception of you overall.

Tagged has been touted as one of the fastest growing social networks around and after I got an invite this weekend, my interest was piqued. I went through the sign up process and came away pretty impressed at their model. I’m not surprised they have massive viral growth. You can’t actually sign up without letting the system go through your address books and opting you in to inviting friends. Whatever your feeling on this, it helps spread the word.

The ‘upload your contacts’ step is used by every social network out there but this is the most aggressive implementation I’ve seen.

Step 1: Quick sign up that requires a full first/last name, email address and password.

• One thing I like here is the use of dynamic bubble help. It may get annoying after a while but on the whole, a slick implementation that adds more than it takes away
• Also, note that you’re opted in by default to receiving offers. Permission marketing rules

Step 2. All your email are belong to us

• You can’t proceed to step 3 (which I assume is profits) without uploading your contacts.
• The real genius in this step is that they bank on the fact that people re-use passwords. The one you entered in step 1 is pre-populated in the password form. The rest of us talk about lowering the barrier to conversion, these guys are living it.

Step 3: Spam Invite your friends

• Friends already on Tagged are shown here. The rest of your book is preselected to receive an invitation from you
• They do provide an unselect all option but it is definitely a little scary when you have to click “Add Friends” to continue.
• Don’t worry folks, no one I know will be getting tag spam from me

Step 4: Photo Upload

• Photo upload. Makes sense, nothing special here

Step 5: More Genius - let’s get a mailing address if they’ll give it to us

• This form makes it feel like you need to input a mailing address to proceed. Fields are labeled required in red.
• This isn’t shown to everyone. I signed up using a couple of emails and didn’t get it every time (they’re optimizing/testing)
• In fact, you can hit “Pass” to skip this step, but it is non-obvious
• Makes sense, if you can get physical in addition to email contact information for a bunch of people that have already opted in to receive marketing offers, why not?

Tagged is definitely one of the most aggressive adopters of viral growth that I’ve seen. Can’t say for sure if there will be a backlash or not, but there’s no doubt that their signup process creates massive growth for them. In their defense, they do make it easy to cancel your account, which one could argue is the least they could do.

Whether or not you like their choices, you have to respect them.

To quote Andrew Chen, (who I found via Matt):

Too annoying? Or too ruthless?
Some might say that they hate the fact that these processes exist, and that they might be too ruthless or even immoral. These points are definitely worth debating. I certainly believe that if you’re able to create a engaging user experience, adding these techniques to the front-end isn’t bad.

If you believe that:

• Ruby on Rails makes development easier
• Product creation is cheaper
• Infrastructure is cheap

… then the corollary is that there’s more competition. Breaking out of the noise in any way possible, even if ruthless, will be a key technique for success in the Web 2.0 world.

Here’s to breaking out.

Facebook is offering its members the ability to post free classified ads. Some interesting snippets from the MSNBC article:

• Facebook has over 22 million members
• Craiglist processes over 17 million ads per month
• Real Estate and Recruitment are the most profitable categories for newspaper classifieds.

Apparently, cars and other for sale items are at the low end of the classifieds food chain.

UPDATE: The importance of recruitment is supported by the fact that both Microsoft (Career Builder) and Yahoo (consortium of 176 newspapers) have partnered with newspaper companies for recruiting ads.

Alex Krupp has a great post on his blog about the role that responses play in encouraging repeat participation from members in online communities.

I recently saw Bob Kraut present a paper on the mediating variables for Usenet participation. The study looked at how getting a reply affected the chance that a poster would return and post again.

For oldtimers who received no replies, 84% posted again. For oldtimers who did receive a reply, 86% posted again. For newcomers who received no replies, 16% posted again.

What’s startling though is the effect getting a reply had on newcomers posting their first time. When looking only at newcomers, getting a reply increased their likelihood of posting again from 16% to 26%. That’s a 62% increase!

Apparently, getting a reply increases satisfaction in all four dimensions. It increases current benefit, it increases expected future benefit, it creates a common bond with the individuals who posted replies, and it increases identification with the group as a whole.

This is completely in line with our experience at Judy’s Book. Receiving responses to questions and getting comments on your posts creates a reason to re-engage with the site. One important thing to remember is to not just have feedback be an online thing.

In the early stages of your community’s evolution prospective participants are not going to be coming back frequently to see what’s happening. Communicating with them via email is a great way to give them a reason to come back. It’s a great way to keep mindshare high and to provide a gentle reminder to people that others care, they should keep the conversation alive.