Make Money Online

RockYou and Facebook announced a deal where RockYou will exclusively use Facebook credits and where Facebook will keep 30 percent of the revenue from the credits. In the same press release, the two firms discussed a “Deal of the Day” project where RockYou issued 6 million Facebook credits to users who interacted with ads.

What just happened? Did RockYou just admit defeat? Did RockYou single-handedly inflate the credits market? Did RockYou publicly admit to radically changing their business model?

RockYou’s agreement to exclusively use Facebook credits at the standard 30 percent cut to Facebook says several things:

1. RockYou didn’t have enough power to negotiate better terms than the 30 percent cut for Facebook
2. RockYou seems to be betting the farm on Facebook, as they’ve just foregone revenue from potential non-Facebook users
3. RockYou is admitting that its star may not be shinning as brightly as in the past and may not shine as bright in the future in their applications business

RockYou is far larger than the other two exclusive users of Facebook credits, Crowdstar and LOLapps, and a bet of this type usually only happens when you’re options are dwindling. Add to the mix the new focus on “branding and promotional” opportunities in the RockYou press release boilerplate, and you see that things are changing for RockYou.  No wonder. Just consider what it means that they serve 15 billion impressions a month or 500 million impressions a day to a social networks with combined populations of over 600 million registered users (sum the user base as listed on Wikipedia for each social network shown on the RockYou home page). That’s less than 1 impression per user per day.

And what about inflation? RockYou and Facebook flooded the market with 5 million Facebook credits in four days. but more recently, every game player I know (half of my Facebook friends) received 20 or 15 free Facebook credits sometime over the last two weeks. So in a not-unlikely scenario, it would seem that Facebook issued 250 million x 15 credits, or 3.75 billion credits. So, yes RockYou did contribute to inflation, but there’s a bigger inflationary pressure.

3.75 billion Facebook credits = $375 million value at the stated “15 credits, a $1.50 USD value”, or $0.10 per credit. If Facebook actually paid developers for these credits when used, that would be the equivalent of 70 percent of $375 M, or $262.5M net to developers. Whether that cash is actually paid out or not, that represents $260+ million of equivalent cash value on the market that didn’t exist before.  Why does this matter? Suddenly the cash equivalent of Zynga’s 2009 revenues (per Jeremy Liew) were dumped on the market. In commonly accepted money supply theory “There is strong empirical evidence of a direct relation between long-term price inflation and money-supply growth, at least for rapid increases in the amount of money in the economy”. This inflationary pressure can drive down real monetary value, making it more difficult for application developers tied to Facebook credits to grow revenues.

The Facebook application economics are changing, and vendors who are exclusively tied to Facebook credits are at the risk of both short and long term fluctuations on the value of Facebook credits and at the mercy of any Facebook credits promotions run during the period of exclusivity. While it may seem that Facebook has enough power to hold its developer partners over a barrel, you have to give them credit for successfully executing a strategy to lock in partners and extract money from their partners’ businesses.

As for RockYou, it may look grim, but look at the fine print of the press release. I’m hopeful that they haven’t really admitted defeat as they state that they will use Facebook credits as “the exclusive virtual currency in RockYou’s social games and applications”. While it does lock them into Facebook credits for virtual currency for their social games and applications anywhere they are distributed, it doesn’t sound like they are actually precluded from using real currencies such as PayPal and credit cards.

So is the RockYou deal the harbinger of bad deals to come, leading developers to lower income and inflation while Facebook reaps the benefits? It could be, and it’s definitely limiting, but the real test will come as more developers start to accept Facebook credits and take a long hard look at the agreements and the limitations on their distribution and revenues that come with such deals.

See the original post:
RockYou At The Mercy Of Facebook Credits For The Next 5 Years

Tweet This Post

Back in 2008, InternetNews reported that Twitter helped Dell generate $1 million in revenue via spontaneous limited offers announced via tweets, and people thought that Twitter had fallen into a business model. Then in April of this year Twitter’s “promoted tweets“, where sponsored messages could be inserted into Twitter streams, was revealed as at least one official leg of the Twitter revenue strategy. Now, another official leg of the revenue strategy was revealed that latches onto the idea from 2008, eCommerce.

The @earlybird account, as explained here, is intended to be a time-sensitive feed where deals are twittered to the masses of people wanting deals. All you need to do is follow @earlybird. Basically, like other accounts, the Twitter support page states “you can follow and unfollow @earlybird at your whim. You may also see these offers if someone you follow retweets an @earlybird tweet.”

On the surface this might seem like a great idea, but look deeper and you will easily see that this could become a completely mediocre offering or drag Twitter into competition with Groupon and it’s dozen or so competitors.

What will work and what won’t on @earlybird

Using @earlybird can be done right, and it can be done wrong, and I’ll briefly look at a few scenarios.

1. @earlybird promotes national deals with major brands
Example offer: Free 3G upgrade on new HP Tablet featuring webOS (I wish), first 10,000 users with US address who reserve at some link.
Why this works: This could have huge marketing and viral distribution potential for HP’s new webOS tablet while at the same time having a true nationwide appeal that anyone and everyone could get into. This takes direct advantage of Twitter’s broadcast nature and avoids local competition that would be provided by Groupon, LivingSocial, BuyWithMe, etc.

2. @earlybird promotes regional deal with regional service provider
Example offer: First 10,000 customers who register at link YYXZ get Rogers Wireless unlimited data for $20 CAD/month.
Why this fails: Rogers wireless is a Canadian wireless provider, and only a fraction of Twitter users fall in areas where Rogers has coverage. If I was following @earlybird, I would start to wonder if @earlybird was going to be relevant to me.

3. @earlybird promotes national deal with niche product
Example offer: First 10,000 users who click on this link get 50 percent off a 1 year supply of saddle conditioner and horse shampoo
Why this fails: Even though this might be a huge hit for the horse lovers out there, how many Twitter users would really want to see this type of deal? Sure it has national appeal, but it’s so far from my areas of interest I’m starting to worry that @earlybird was going to be a needle in a haystack in terms of deal relevance.

4. @earlybird promotes local deal with widely desired product.
Example offer: First 10,000 users who register at link get a free extra night and complementary breakfast at any Joie de Vivre hotel with 1 night purchase.
Why this fails: While I might buy this, since the hotel chain is great, they only exist in California. Millions of others who aren’t interested in deals in California will again be alienated or possibly question the deal selection.

Will @earlybird work?

If I signed up for @earlybird, and there was 1 deal a day, but only 1 in 4 days it might be relevant, I might consider trimming them from whom I follow. If there were 100 deals a day and 1 was relevant, I would definitely unfollow them without a second thought. At some point, I need to respect my time and make sure that the accounts I follow provide some value to me. If done wrong, @earlydeals won’t be relevant and could even lead me to associate Twitter with irrelevant deal spam. On the other hand, deal sites cater to certain users, are categorized by category, have deal alerts, filters, and narrow ways to apply my preferences to deals that I want.

The way I look at it, I’m a bit worried about @earlybird coming out the gate too generically and hurting its chances of getting long-term sustainable attention. With people like me wanting low cost travel from San Jose to Honolulu and tech deals on netbooks with Nvidia ion2 graphics, it may be difficult for @earlybird to satisfy the deal hunting needs of its diverse audience.

Continued here:
Tweet This Post

Track the recent stories about Facebook, MySpace, and Google and you may see an intriguing pattern developing. As covered by Andrew Wee, there are rampant rumors that Google made a major investment in Zynga. The rumor-mill has also focused on “Google Me,” a supposed Facebook rival that’s secretly in the works. Meanwhile, rumors about the sale of MySpace are simultaneously circulating. Coincidence? Well, ask skeptics and they’ll tell you they don’t believe in coincidence.

MySpace, Jonathan Miller, digital chief of News Corp., owner of the flagging social network, said at a media conference last week, “We are definitely not in any ongoing talks for a sale of MySpace.” Instead, Miller said, the site will re-launch later this year, whatever that means.

Let’s take that at face value and, for the moment, put MySpace aside (with due respect, just about everyone is putting MySpace aside these days).

Consider the Google Me rumor. Google Me could be viewed as a logical progression from Google Profile and Google Buzz. Google Profile was originally positioned by Google as “how to present yourself on Google products to other Google users.” In addition to text and photos, a user can link to blogs and a Facebook profile. Google Profile, however, became something much more social when it showed up in search results for someone’s name. In fact, if you search on your own name and you don’t have a Google Profile, a Google ad will show up at the top of the page encouraging you to create one.

In February, Google Buzz came along. Google described it as “a new way to start conversations about the things you find interesting.” Google Buzz was built into Gmail, but Buzz updates are also posted on a user’s Google Profile and are immediately indexed for Google Search.

Hmmm, what’s going on here? It looks very much like the not-so-subtle beginnings of a Google social network. Add in Zynga, which as Andrew Wee points out, “is aimed directly at Facebook and the escalating war between the two,” and things get all the more interesting.

But it turns out that Google already owns a social network called Orkut, named after its founder, a Google employee. The problem is Orkut’s biggest user base is in Brazil and India. But now those markets are up for grabs. According to The New York Times, Facebook is “pulling even with Orkut in India, where only a year ago, Orkut was more than twice as large as Facebook. In the last year, Facebook has grown eightfold, to eight million users, in Brazil, where Orkut has 28 million.” It would be a tough sell to grow Orkut’s critical mass to global proportions.

Facebook doesn’t seem to be too worried about Google’s social media initiatives, but the opposite may be true of Google. Todd Dagres, a co-founder and partner at Spark Capital, which has invested in Twitter, tells The New York Times:

“There is nothing more threatening to Google than a company [Facebook] that has 500 million subscribers and knows a lot about them and places targeted advertisements in front of them. For every second that people are on Facebook and for every ad that Facebook puts in front of their face, it is one less second that people are on Google and one less ad that Google puts in front of their face.”

Add advertising to the mix and of course, the battle intensifies.  Things get even murkier. Read CT Moore’s analysis and you’ll see why.

When it comes to social media, Facebook is a global powerhouse. About 70 percent of its half-a-billion users are outside of the United States. At the moment, Facebook is generated about $1 billion of revenue annually. That’s too big a market to ignore. So what is Google doing? Getting into social media.

Oh yes, and when it comes to search, Google is the undisputed leader. So what is Facebook doing? Getting into search, possibly. While Facebook denies it, some believe their Open Graph-enabled web pages mark the beginning of an effort to challenge Google’s search superiority.

Let’s face it – Facebook is to social media what Google is to search. Whatever strategic moves either party makes, chances are it will stay that way – at least for a while.

Read the original:
As the War Between Facebook and Google Heats Up, Zynga is Just One of Many Battles

Tweet This Post

Recently I was chatting with friends about the games that they were playing on Facebook, and independently each mentioned how the games have taken a turn for the worst. To my surprise, both mentioned that the games were asking for money all the time, suggesting that by spending money, they could a) do better, b) stop losing, or c) have more fun. Unfortunately, both of my respondents saw this as the incitement of an arms race, where users who pay real money, get an advantage. In short, “the game favors the rich or those with more cash than brains”, their words.

This sentiment is bolstered by an article from Inside Social Games, citing active game user numbers plummeting on Facebook. The article mentions two key suspects, blaming the games as being old, and the discontinuing of the ‘notifications’ from Facebook.  I agree that those two are factors, since the notifications have kept players active by continuously reminding them to play the game, and the game concept has been out for a while, but I would submit that “asking for money” is a symptom of a larger problem. But first, let’s look at that symptom.

The Handout Issue

Since my friends play Mafia Wars, I decided to look more closely at what they were talking about. One of those annoyances is the blatant offer of discounted reward points where friends are offered variable discounts. Friends talk, and when one found out that he was offered a 20% discount while the other received a 40% off offer he was turned-off from the game and future offers. He felt like he was being ripped off. Likewise, when both friends saw the “tired of losing” image:For them it’s a silly way to try raise users abilities in game without actually increasing skill. While they accept that the Yankees may be the best ball club money can buy in baseball, there’s only one Yankees. Allowing anyone and everyone to spend as much money as they can made the game less competitive and thus less appealing, as skill was replaced by money.

They reported that not only did they see this “continuous asking for handouts” happening in Mafia Wars, but it was happening in other games too. I took a look at the data from the Inside Social games article and created a combination chart, looking at the monthly active users and decrease in active users. Interestingly, Zynga leads the decrease in active users, with 75 percent of their games in the top 25 losing 10 percent or more active users. Manually adding the numbers, that meant over 25,000,000 fewer users were playing the Zynga games, an abandonment rate hard to attribute to just the games being old. The notifications changes and/or “asking for money” changes could be the culprit.

Taking the Fun Out of It

Notifications play an active role in driving people back to the game, and when they get back to the games, the users inevitably find out that their fish, crops, properties, mafia, zoo, etc has been eaten, withered, robbed, attacked, unfed, or worse, driving them to engage with the game again to repair the damage and return to some state. But, if you add in the ‘just spend money to make it better’ routine, users are conditioned into a new mindset – that returning to the game means that they need to spend money.

Something that was once fun suddenly became something that costs money, still needed attention, and would continue to drag on their wallets for the visible future.  Having worked in payments and commerce, I would argue that this is turning into an avoidable recurring payment. Who wants more financial responsibility, especially now?

Is this a Symptom of A Larger Problem?

Earlier, I wrote how Facebook was becoming at odds with it social game bretheren and how social game providers were facing lower revenues (as much as 20 percent less)  due to the reduction of scammy offers. Take those challenges and add the reported 30 percent cut that Facebook wants from the purchase of Facebook credits, and suddenly, social game providers are facing significantly lower margins than before.

For comparative purposes, if you bought  $10 worth of reward points for Mafia Wars directly from Zynga, the processing fees might cost as much as $1 (this should be a maximum) leaving Zynga with $9, but now with Facebook charging 30 percent, the same $10 would only yield Zynga $7.  So without any increase in value to the end-user or to Zynga, there’s been another reduction in cash flow of over 20 percent.

So to keep revenue at levels comparable to those before the scammy offers were removed and before Facebook took their 30 percent cut,  Zynga and other social game providers have been experimenting with their formulas, where one of the cheaper experiments is to ask for money. Unfortunately, asking for money can turn-off users, including my friends and myself, and cause others to look for other options.

While Facebook needs it cut, and Zynga deserves respect for continuously testing and incrementally improving their games, the addition of revenue and incentives is a delicate matter that should not be taken lightly.  Innovation in game play is important, but innovation in ways to nag users into paying can have disastrous effects when user have the choice, ability, and inclination to say ‘no’.  I look forward to Zynga applying more game innovation to draw users back. I don’t know if my friends will come back and play, but give them a good reason to, and maybe they will.

Excerpted from:
Social Gamers Fleeing Facebook As Games Ask For Handouts

Tweet This Post

Everywhere I turn I hear people talking about some iPhone app. The funny thing is, even a week later, they’re not talking about that app any more. They’ve forgotten all about it. The joy and wonder of that “app that was so great last week” quickly dissipated; and when asked what happened, the response seems to fall in one of the following buckets:

• I’ve got another cool one, the other one was so last week
• I got bored with it
• Are you kidding, I’ve got more important things to worry about

So while the responses (okay, my sample size was only 8 and hardly statistically significant)  seemed like the iPhone apps were just fashion trends or for things people did when they had too much free time, it got me wondering what all the developer craziness around iPhones apps was about. After all, at last check, it costs $99 to register for the ability to attempt to publish an app to the iTunes App Store. Yes, I’ve looked into creating my own app, but at a $99 upfront cost and blog buzz that Apple arbitrarily blocks or delays app approval, there’s no guarantee that your app gets published, or if it will even make up your $99 fee.

Enter Appolicious and their guest post on TechCrunch. They share data about the top apps tracked by Appolicious and represents a sample of the apps out there. Instead of making you read the chart and strain your eyes, I made my own version to strain your eyes, and the data is telling.

This first chart represents the top 25 from the article, visually depicting how quickly the sales drop to nearly invisible levels. Of course, you lottery players can focus on the top 8 that sold over 100,000, but as a realist, I put that in the bigger picture of cost/benefit and expectation in light of the supposed 200,000 iPhone apps as counted by AppShopper.

Someone with more restrictions on time and/or money might take a more realistic view of the second chart below. This one is based on the top 25 from the chart, after the top 10 highest grossing apps are removed. This is where the truth is really revealed and the real decisions can be made.

After the top 20 in this group, the apps sold appear to be rapidly sliding below the 10,000 sales mark. Why is this important? If your app sold 10,000 units at $1 (rounded up from $0.99 for ease of discussion) and Apple took a 30 percent cut, that leaves $7000 for you. But put your reality hat back on, and you’ll remember that most of those apps come in at less than that 10,000 unit mark. Suddenly, the odds of riches seem pretty low, and while I might still be hopeful that I’ll make my $99 fee back, I would worry about making my development costs back.

So… what can be learned here? A careful dose of reality should help set expectations when looking for riches in the iTunes App Store. I still believe that companies should build the apps, but I believe that they should do it based on a longer term branding and awareness strategy. Branding and awareness, yes, but riches? I don’t think there’s an app for that.

View original post here:
Developer Riches: Is There An App For That?

Tweet This Post

The eyes of Google haven’t ignored the rise of the iPad or the noise being made by Amazon’s Kindle device. Instead, the search company is looking ahead to how it can get into the digital book game.

Under a plan that came to light this week, Google will allow users to buy books through its book search system and partner with publishers to sell on the site with a revenue sharing system. Google Editions is expected to launch in June or July.

Two factors which can potentially make this a game-changer in the e-book world (one in which Amazon once thought it was a safe leader) are the percentages of revenue that Google decides to share with publishers and the “device” it decides to display the books on.

Many observers see Google’s reader being another cloud-based application, which would take the grip away from the hardware-based solutions offered by Amazon and Apple.

“This levels the retail playing field,” Evan Schnittman, vice president of global business development for Oxford University Press, told the Wall Street Journal. “And as a publisher, what I like is that I won’t have to think about audiences based on devices. This is an electronic product that consumers can get anywhere as long as they have a Google account.”

Interestingly enough, Fast Company’s analysis of the situation concludes that the hardware is a must and that’s why Amazon can stay ahead.

The percentages of revenue sharing is where the real racket could start with Amazon and Apple. Who gives the best deal to publishers is most likely to secure the best rights for the best books from publishers looking at their bottom line. Under Google’s payment scheme, publishers will receive about 63 percent of the gross sales, and Google will keep the remaining 37 percent. Google’s billion-dollar ability to negotiate good terms is what sets it apart. eWeek.com sees that as one reason why Google is already the winner before the fight has even started:

“Google intends to share the majority of its profit with partners to help it roll out its service in as many places as possible. It’s another smart move. Although publishers are making strong profits on their deals with Apple and Amazon.com, they’ll naturally migrate to the ebook platform that will deliver the best return.”

This move by Google also begs the question whether they will utilize the Google Affiliate Network to further their advantage over Amazon.

The bottom line is going to put Google’s ubiquity, the continued adoption of its online applications and its buying and negotiating power against Apple’s iBookstore/iTunes model and hardware cache. Amazon has its inventory, but is saddled with a device that doesn’t have the robust abilities of either Apple’s alternatives and Google’s grip on the web.

View original post here:
Google Takes Aim at Amazon with Editions

Tweet This Post

Recently, Avast Anti-Virus released a report claiming that Yahoo’s Right Media YieldManager is the leading distributor of “malvertising”. Malvertising being malware that exploits holes in the web  applications that are used to deliver web ads from the big ad delivery platforms. Yahoo! is not alone, malware was also found to be served by Fox Audience Network’s Fimserve.com, Google’s Double Click, and MySpace.

Visitors to sites like The New York Times, The Drudge Report, TechCrunch, and many others found their computers infected with a trojan that looks for vulnerabilities in Java, QuickTime, and multiple Adobe products. Even security savvy surfers were not protected as computers were infected once the ad loaded, not when the ad was clicked.

Once the dust settled, the finger pointing began. According to a CNET interview with Avast Researcher Jiri Sejtko, the malware is a Trojan Javascript form that targets the Windows operating system. Sejtko said that of the ad networks impacted by the Trojan, dubbed JS:Prontexi, only Double Click took proactive measures against it.

“The Google portion of JS:Prontexi is quite small and has gotten visibly even smaller as they have taken steps to improve the situation. That is not the case with Yahoo and Fox.”

Right Media VP Bennie Smith responded to his  network being accused of serving up malicious ads on TechCrunch:

“Partnering with a third-party ad network is a good thing, but you can’t remove all the risk and shift all the responsibility to the ad network…The user is coming to your site, not to the ad network. The primary responsibility still resides with you.”

That’s right. According to Smith it’s the publisher’s fault that the applications that they have no control over are serving up malware.

Working in web security, there I have seen plenty of web applications that are vulnerable to attacks. If I run a blog that is powered by WordPress, then I need to do everything I can to secure it. If a plug-in has known vulnerabilities I have to either look for a patch, disable it, or replace it.

However, unlike the blog example above, publishers have no way of working with the applications that run these ad networks to better secure it. Instead, they have to trust that the ad manager they are running on their site has been secured. They have to trust that the advertisements have gone through some type of review to insure that they are not delivering up malicious code to the visitors.

Unfortunately for the publishers, when their site infects a visitor, the visitor doesn’t blame the ad manager. They blame the web site. If my computer was infected after visiting TechCrunch, I am going to stop visiting. If The Drudge Report is flagged as unsafe, then I will go elsewhere.

Maybe publishers do need to take the initiative. To protect their visitors, perhaps they need to look at which ad networks are doing everything they can to prevent the spread of malware through their network. Ask them questions like:

•    What is the review process for ensuring an ad does not contain malware?
•    What is done to ensure that attackers cannot exploit the code of legitimate ads?
•    Is there a web application firewall in place to inspect web layer traffic?
•    When was the last time your application underwent a code review?
•    Who do I contact if I suspect an ad is serving malware to my visitors?
•    What will you do if your network serves ads on my site that contain malware?

If your questions can’t be answered to your satisfaction, maybe it is time to take responsibility and look for a new ad network. One who is willing to make sure your reputation isn’t damaged by the content they serve on your web site.

Here is the original post:
prontexi trojan

Tweet This Post

While there’s a ton of hype about micropayments and their role in virtual goods, many economic trends don’t really sink in until there’s a high-profile success story that people can dream about. It doesn’t matter that less than 10% make any serious money, since it’s easier to buy the dream of riches than to face the reality of the statistics.

The real money in virtual goods isn’t found in the iPhone App Store, it’s in social network games and virtual worlds. While I’ve personally seen 20,000 limited edition items sell out on Mafia Wars in one day, that’s just a tiny spec in the new digital economy of digital goods.

Want an idea of what that tiny spec was worth?  The math goes like this: 20,000 items at 42 points/credits each. 42 rewards points costs $10 (source in game marketplace), so 20,000 x 10 = $200,000 retail value in one day. While that item may have been special and not everyone pays cash or PayPal directly for the points; it’s a very suggestive revenue statement – virtual goods are serious business.

But before the bandwagon starts cheering that virtual goods gold rush, I respectfully submit that this is the same trend expanding from virtual worlds to games and has been building momentum for a decade.

Let’s consider some virtual goods economies where there are indeed several high profile success stories to dream about. Forbes discusses the topic, but I’ll point out some highlights with my thoughts. The first goes back to 2004 and is all about an ROI of nearly 400% and a cash outlay of $26,500, but keep dreaming as there huge sums of money to be made in virtual goods:

• Do you seek rare virtual animals or cater to those who do? Then Amethera Treasure Island should peak your interest. This business in virtual world Entropia costs $26,500, but returns ~$100,000 per year.
• Do you want the own the latest hotspot asteroid? Then Club Neverdie in Entropia is your type of business. Purchased for $100,000 in real money in 2005, the nightclub, shopping mall, and sport stadium based on an asteroid is estimated to be worth $1 million.
• If asteroids are too low class for you and you’d rather cater to the luxury minded types? Keep your eye on Crystal Palace Space Station in Entropia which Forbes reports was sold for $330,000 in hopes of charging the wealthy crowd fees to visit and experience the latest in space station luxury.

While the previous examples showcase the money made in virtual real estate and experiences, others are putting the sweat and blood into other ways to earn money:

• Skilled artist or just a collector? Consider dropping north of $11,000 on an Anatomically Correct Virtual Skeleton available only in virtual world Second Life. I’ve met virtual clothing designers who reported that they earned smaller, but respectable monthly incomes selling clothes in Second Life as well.
• White collar criminal or just a hacker? A hacker in Second Life stole the real equivalent of $10,000 when he hacked into Second Life’s stock exchange.

Back in 1999 I remember users of The Palace creating and selling props on eBay. These props could be used by in-world avatars to dress up and show your personal style. Many people made and exchanged virtual goods for free, but even then, people bought, sold, and even stole the virtual good props.

Virtual goods not only are hot, they’ve been hot since 1999, been breaking bank accounts since 2004, and are now becoming a significant factor in reshaping the way we think about making money online. More is happening in this space, so stay tuned.

More here:
Tweet This Post

A new study out by the Pew Internet and American Life Project tells us how consumers get their news. No surprise: 92 percent of Americans use multiple platforms (television, newspapers, radio, the Internet) to get news on a typical day. But the real story, of course, is the impact of the Internet and the fundamental ways it is changing consumer behavior.

The Internet is now third in popularity for news, behind only local television and national television news. But here are some key findings that go a lot deeper:

• Most people use between two and five online news sources
• 65 percent say they do not have a single favorite website for news
• 33 percent of cell phone owners access news on their cell phones
• 37 percent of Internet users have contributed to the creation of news, commented about it, or disseminated it via postings on social media sites like Facebook or Twitter
• 50 percent of American news consumers say they rely to some degree on people around them to tell them the news they need to know
• More than 80 percent of online news consumers get or share links in emails.
• 70 percent of Americans think “the amount of news and information available from different sources today is overwhelming.”

What can online marketers learn from these statistics?

1.    It appears that the Internet has replaced traditional newspapers and news magazines, but it has also encouraged news-hopping, so to speak. If consumers are using multiple news sources rather than a single source, clearly no one media outlet has garnered their loyalty. Are consumers not getting an objective perspective from a single source? Or do they get different kinds of news from different sites? Maybe consumers are more discriminating than they’re often given credit for and they like a story to be validated by more than one source. Whatever the reason, it means online marketers shouldn’t commit all of their ad dollars to just one online news source.

2.    Consumers will likely rely more and more on their cell phones to get online information and news. As I wrote in a previous post, 2010 could become a banner year for mobile usage, so online marketers need to plan now to get their fair share of this marketplace.

3.    The old news paradigm seems to be crumbling. It used to be that authoritative figures delivered the news via traditional media channels. Newspaper reporters’ stories and columnists’ commentaries carried weight. Television anchors were respected. The news was the news.

The new news paradigm is very different. Professional journalists are being replaced with citizen journalists and bloggers. While amateur journalism may not always be a good thing, it does represent a much broader spectrum of observation and opinion. Media outlets like CNN encourage consumers to send in their video reports. Over a third of consumers are taking a participatory role in the news now, and that’s likely to increase. They’re sharing the news with friends and acquaintances, discussing it online, and not just accepting news at face value. For the most part, online marketers already recognize the consumers’ collaborative power. That’s why they are building in opportunities for social interaction and feedback into their marketing programs.

4.    It may not be surprising that the majority of news consumers are overwhelmed by information. Television channels have proliferated and the Internet has opened up more informational opportunities than any consumer could ever handle. But this may suggest another opportunity: What if an online marketer could help the consumer cut through the clutter? It’s already being done by organizations such as SmartBrief, a media company that hand-picks relevant news, summarizes it, and delivers it with links to the original stories in e-mail newsletters tailored to 25 different industries.

We all recognize that the Internet has fundamentally changed the manner in which people consume information. As marketers, we need to also recognize what each of us can do to help solve information overload – and to become such a vital resource that a consumer will choose the information we provide over someone else’s.

See more here:
4 Lessons Marketers Can Learn From How Consumers Get Their News

Tweet This Post

In the last post I provided some background on offers and the confusion they may cause. I also pointed out the potential for scams. In this article, I’ll put a little more focus into the complexity of the offer systems and show another example of how confusing offers could lead to complaints.  For the sake of this argument, the values used in my examples are chosen for effect and are not accurate for any specific offer system.

Previously I described an offer for a free Walmart gift card.  The offer awards 21 points for participation in and promises to earn you a $1,000 Walmart gift card as well.  But what are the economics behind the offer?  How is it fiscally viable for a free survey or trial to result in you getting 21 points that would actually cost you $5 to purchase? In this case, it seems too good to be true, and it is. There are two views of the systems. First, the positive view: cost of acquisition.

In this model, when a company knows it typically takes $3 in direct and indirect advertising to acquire a customer they might decide to spend an amount less than $3 to acquire a new customer. For example, an offer may yield a $9 a month subscription to Netflix, at say a $2 cost of acquisition, and a subscriber who may or may not use the service. Typically, the offer would yield a trial customer, costing Netflix $2 in marketing, plus the gross operating costs to support that subscription, but no continuing subscription. For illustrative purposes, let’s say the trial included four discs, sent and returned, at a cash flow cost of $0.80 per disc (due to an estimated cost of $0.40 shipping each way for each disc) for a total of $3.20. The non-converting trial user cost is then $5.20 (or $2 + $3.20). Again, these numbers are estimates that may be off, but have some anchor to the real costs of the offer.

Then, there’s the negative view of the system in which advertisers get fleeced and users get scammed.

This model is comprised of two components: in point A, users take offers with no intention of spending any money with the advertisers, and (B) unknowing users sign-up for subscriptions without intending to. To illustrate point A, I encourage users to briefly visit the sites mafiawarstrategy.com or their sister site mobsterstrategy.com, both which cater to players of mafia/mobster games by Zynga, mentioned in the first part of this series, and Playdom, another large social gaming company. On these sites, and sites like them, you can find instructions on how to pick and choose offers, which offers are free, which offers to avoid due to spam, and how to manage your offers to insure you don’t get charged a penny.

My favorite part of the posts at these sites is that they carefully explain how to spot and avoid confusing offers that may never result in points. Worried about getting scammed? Well, these sites tell you what proof you need to get your points, the minimum actions needed to get your points, and what happens if you don’t do enough or don’t have proof. Be warned that you can’t access the content of these articles unless you do an offer. Of course, I make no guarantees on the quality of the offer that you’ll be shown.  And you should know that the ad network for the sites claims that publishers are paid $1 per action/offer completed.

So if you’re ready, go here. An image of the page you’ll see is below:

Note the phrasing on the page from the ad network: “These DO NOT require credit cards or trial signup offers”. Remember this screen for later in this article. If you click through or at least believe what I’m saying, you’ve already noticed that the article is all about getting points for free and not sending any money to the advertisers.

Now, on to point B and the risk users run for getting scammed. Let’s start by looking at the ‘free survey’ selections.

When you choose the IQ quiz you’re given a series of questions. The two images below  display the survey start and the first question. The IQ quiz seems harmless enough, and even better, I’m promised 21 points for answering a few simple questions.

Now, as you advance to the last quiz question, you get used to quickly clicking answers and never scrolling down. The questions are simple and nicely framed and there is no need to look below the frame of the quiz.  Once you reach the last screen, below, by rushing through the ten easy questions you’re faced with an innocuous phone number entry box and the prompt: “Enter your phone to get your results”.

The blackboard frame in the picture provides a psychological cue to stay focused on the quiz and NOT scroll down to the bottom of the page. So if you don’t scroll down and just enter your phone number, you would have just subscribed to a $4.99/month mobile phone service (see the small print). If you don’t enter your phone number, you would still have completed the survey, right? The only reason to enter your phone number was to get the results. Now, if you try to exit the survey, another page pops up trying to entice you to do another survey:

And if you close that, you end up on the article where you started, but the blocking overlay has changed:

You completed the offer by taking the “no credit card/no trial” quiz, but you did not take the final step to get your results and subscribe to the $4.99 monthly service. By the letter of the offer, you should have earned a reward; access to the article, or your 21 game points.

But the reality of the situation is that the ad network has to pay the publisher, so unless the user subscribes there’s no money to sponsor the offer. Users need to pay somehow, and these offers depend on people not reading the fine print and not scrolling down the page.

So what just happened? A user wasted his time, did not get his points, and the advertiser got nothing since the user failed to subscribe. And even if the user did subscribe they would likely unsubscribe immediately, as instructed by the article behind the offer wall.

Confused? Most people are. These offers have lead to various tech magazines citing revenues over $300 million for these types of offers, while related reward offers have been cited at $1.4 billion in a recent senate report.

So with 100 million teens and tweens looking for a leg up as well as ‘points’ to help them in games, do you really believe that they all read the fine print? Or that they will be able to find the fine print in an easy and non-confusing manner? It doesn’t take a high IQ to figure out the answer to those questions. And that’s somthing the scammers will try to take to the bank.

Excerpt from:
Virtual Goods, Offers, and Scams: Part 2

Search Engine Keywords:

• trial offers with free walmart gift card

Tweet This Post

There’s been alot of hype and debate around the concepts of virtual goods and offers due to a few high flying companies which have been media darlings. The highest profile company in question is Zynga, athough other social gaming sites and social networks have employed similar tactics. All have enormous user bases and are pulling in hundreds of millions in revenue, but the debate centers around how they make earn money. There’s too much to cover in one post, so this discussion will be split into two posts, with this one providing the basis for the controversy.

By some estimates, these companies may earn 1/3 of their revenues from something called “offers”. What is an offer you say? An offer, for the purposes of this article, is an exchange of information and/or actions to earn credit spendable on a web site, virtual world, or online game. The concept is simple and particularly lucrative.

Web site visitors or game players can get in game points or currency that they can spend on upgrades, weapons, tools, or other power ups that give them an advantage. The points, often called cash, coins, or gold, can be purchased directly using several payment instruments; but for the cash strapped, unbanked, cheap, or income challenged, a more attractive mechanism is to use offers to gain these credits. Offers, up until a month ago when negative media attention from sites like Techcrunch and backlash caused Facebook to clean house, included surveys, quizzes, trials for magazines, game rentals, DVD rentals, credit cards, and more, many of which touted free trial or no cash or credit card required.

The partial list of offers (left) entices the user to enter trials, sign-up for services, or take quizzes and surveys.

What makes offers so attractive? How does “Fill out a survey and earn 19 points” sound to you? Especially when 19 points gets you a 10% boost in game income, increased character speed or other abilities? So for just a few minutes of time, you can earn the points that other gamers may spend their hard earned cash on.

For example in the popular game Mobsters, by Playdom, it would cost you $4.99 to purchase 21 points; thus taking these surveys sounds attractive since the math would suggest that if I completed a survey every 10 minutes, in an hour I would have done 6 surveys, earned 126 points, and saved nearly $50. But think about what just happened – the discussion turned from 1 survey and 19 points to a subtle assignment of a working wage for the game player, where he/she could earn the equivalent of $50/hour. Other offers include Blockbuster video trials, Netflix trials, Credit Cards sign-ups, mobile phone content trials, and more. Great deal for the end user, on the surface.

Before going forward, I need to add that many of the scammy offers have already been removed from by many of the providers due to the media attention, however, even the remaining offers by reputable companies still have issues. The risks of these offers fall on the user signing up for the offer and the merchant sponsoring the offer.

• Does the users know what he or she is signing up for?
• What quality of lead is the merchant receiving?

Problems arrise due to confusion over how to complete the offer. The Entertainment book offer button takes the user to a page with no actual mention of the offer. Are users supposed to sign-up? If so, how do they get credit?

The same problem appears for the Direct TV offer. How does the user know what to do? How does he/she earn credit?

By now you may be wondering where the deal really is. If users have to pay for subscriptions, why don’t they buy points directly? Do users always have to spend money to get their points? You’ve now hit the tip of the iceberg and are wondering if this amounts to a system for scams.

As a starter for the next post, consider the two images below.

The offer is not from Wal-Mart, but from a rewards program company, and it looks pretty good, right? Well, if you read the fine print you’ll see that to get your ‘free’ $1,000 gift card you must complete 13 offers. But click through and look at the second image: you’ll see it says you have to complete two offers to get your ‘free’ gift. How does this make sense? The user was lead to believe they had to complete one offer to get their free 21 points. This is starting to smell like the BlueHippo investigation by the FTC, where offers were supposed to get you a free PC. Yet they only shipped one. Yes one.

In my next post I’ll discuss my experience trying a few of these offers, some additional math around the business, and discussion on the even larger problem that this is revealing.

Excerpt from:
Virtual Goods, Offers, and Scams: Part 1

Tweet This Post

As a blogger and an ex-newspaper reporter I have an axe to grind with many of my peers. Please avoid the temptation to distort reality by quoting statistics and data out of context, no matter how linkbait worthy the intended headline or story angle might be.

What raised my hackles? I read this eWeek article and choked when I saw this line:

“Twitter boasted astronomical growth, up 1,170 percent from its negligible .15 percent market share from September 2008″.

I decided to check out the source, Experian Hitwise’s press release on social network traffic, and examine their report using my own calculations:

Twitter September 2009 social network market share of a whopping 1.84% is 12.26 times (or 1,226%) of it’s 0.15% September 2008 figure. This is derived by taking 1.84 divided by 0.15 (1.84/0.15).

Taking a leaf out of a grade school math book, the increase in traffic can be calculated by the following formula:

Percentage Increase = [(new figure - old figure) / old figure] * 100% which should be [(1.84-0.15)/0.15]*100% = 1,127% or an increase of 11.27 times over the previous figure.

So where did the 1,170% figure mentioned in Hitwise’s release come from? Beats me. Maybe someone was a little lax in checking their own stats.

Should we be concerned when a web measurement firm whose bread and butter comes from reporting data, reports it inaccurately? If the reported data is incorrect, how about the validity of the web data contained the report? What happens when a respected media outlet like eWeek publishes data verbatim, without running their own checks to verify accuracy provided by a newsmaker?

Quality control of data is obviously an issue.

Even more interesting is the 1,127% or 1,170% year-on-year growth figure attributed to Twitter’s growth. Everyone loves to see impressive numbers, especially if it’s in multiples of 100%.

Mark Twain popularized the phrase “There are three kinds of lies: lies, damned lies, and statistics.”

Statistics are powerful because they are viewed as logic based.  In school math was the only subject you could get a perfect score in, and that thinking has carried over into adult life. People like seeing statistics, no matter how skewed, because it makes them feel secure in the information they have been given. When delivered by a smart PR firm, marketing team, or in the media the data is often accepted without question. 

This is because most individuals (internet marketers included) are inherently bad at math and numbers in general. Whether by choice or circumstances, they just aren’t equipped to deal with data critically or intelligently.

I’ve seen more than a few isolated instances where writers cite 500% growth or 1,270% increase in profit, but does this mean anything?

Context is key if you want to make sense of data. A sales increase from $1 to $5 is an increase of 400%, and publishing an article announcing a 400% increase will get you more than your fair share of eyeballs. However, if you consider that $5 would barely pay for lunch, it’s a case where statistics, without appropriate context, can be manipulated to distort reality. What’s important when dealing with data is to look at information against the appropriate backdrop.

If your company is growing at 90%, while comparable peers in the same industry are growing at 300%, you’re lagging behind the industry. By “comparable peers” I’m referring to partners or competitors that are equivalent in size or can be mathematically adjusted to provide a meaningful basis of comparison.

Context and relevance and looking at data in a meaningful way means seeing a $1 billion revenue figure and a net profit margin of 0.5%. Or a 500% monthly sales growth figure from a baseline of $27 in sales. Do these figures mean anything? Only when they’re seen from the perspective of the big picture.

If you want to see the forest and not just the trees, don’t simply swallow the “lies, damned lies, and statistics” they are trying to spoonfeed you.

View original post here:
Are Reporters and Bloggers Guilty Of Using Weapons of Statistical Destruction?

Tweet This Post

I recently wrote about the fact that reviewing is becoming the new advertising. I made the point that reviewing is part of a trend towards transparency: these days consumers want to know all about companies and their products and consumers are anything but shy when it comes to providing their input and feedback.

Well, the ultimate prize for feedback was awarded on September 21, when Netflix gave a group of seven people $1 million for a crowdsourced solution that beat the performance of Cinematch, the company’s own customer recommendation engine. Three years ago, Netflix launched the contest, offering the generous prize to the winner who could beat Cinematch by at least 10 percent. In late June, according to The New York Times,
a multinational team of seven data wonks calling themselves “BellKor’s Pragmatic Chaos” surpassed the 10 percent goal.

Why should we care? Because Netflix, instead of wearing “Not Invented Here” blinders, solicited its users and offered to pay handsomely for a better mousetrap. In essence, Netflix bought a major product development project from an outside group of users. They gained valuable insight from their base, and Netflix will now reap the rewards and directly impact the customer experience.

As The Times story points out:

“The Netflix contest has been widely followed because its lessons could extend well beyond improving movie picks. The researchers from around the world were grappling with a huge data set – 100 million movie ratings – and the challenges of large-scale predictive modeling, which can be applied across the fields of science, commerce and politics.

The way the teams came together, especially late in the contest, and the improved results that were achieved suggest that this kind of Internet-enabled approach, known as crowdsourcing, can be applied to complex scientific and business challenges.”

Until now, crowdsourcing has been limited to relatively minor commercial ventures, such as designers submitting logos or t-shirt designs. But the Netflix experience moves crowdsourcing up into the stratosphere. Netflix is so happy with the results of their first crowdsourced solution that the company is launching another contest.

Today, reviewing may be the new advertising, but tomorrow, crowdsourcing could be the new product development. Reviewing, crowdsourcing, whatever it is… In the end, it represents the ultimate in consumer empowerment.

View original post here:
From Reviewing to Crowdsourcing

Tweet This Post

There are few events that knock an 800 lb. gorilla off its particular perch. Sometimes laziness, atrophy, the lack of ability to adapt will do the beast in. Sometimes a competing gorilla that is younger, more aggressive, has access to better technology will usurp the spot. On rare occasion two 800 lb. gorillas will meet and marriage will do the trick.

Such is the case with Amazon’s purchase of Zappos.

A Tale of Two Gorillas

Amazon’s marketplace is a juggernaut. In Q1 of 2009 Amazon posted $4.89 billion in net sales an increase of 18% over Q1 of 2008 which should be considered an epic feat in a down economy.

Amazon not only owns the book vertical but seeks to replicate Google’s clout in search within the online retail space. Thus it has aggressively gone after every leader in a retail vertical: Ebay, Buy.com, Overstock, and of course Barnes and Noble. Amazon has paired its aggressive strategy with the production of cutting edge consumer products like the Kindle and a near zealous acquisition of numerous patents (they own the patents to 1-click checkout and 404 error pages).

Now in its 10th year Zappos owns the shoe vertical with over $1 billion in sales reported in 2008. Think about that; $1 billion dollars on a product where fit is crucial. You don’t just wear shoes one size too large “just around the house”.  Zappos achieved such growth through two key tactics: 1) aggressive purchasing of product lines from shoe manufacturers; 2) unique approach to customer service keenly focused on repeat sales.

On the purchasing side of the business Zappos buyers are often known to buy whole lines of popular products from shoe manufacturers or at least all the most common sizes of a particular shoe line.  On the customer end Zappos alleviates the worry about fit by offering free shipping both ways and unheard of 365 day return policy. More importantly personal touches as the recent BoxBreak promotion with Magnify.com, earn customer loyalty. According to a BrandWeek interview with Zappos CEO Tony Hsieh, approximately 75% of sales come from repeat customers.

Driving Forces behind the Purchase

Amazon was able to smother many competitors like Ebay’s Half.com or outright buy them like AbeBooks, but; they were never able to make much of an in-road into the shoe vertical.  Zappos’ presence was just part of the issue. The shoe vertical is a very competitive and crowded space where consumers often have a hard time differentiating between retailers (Shoes.com and Onlineshoes.com for instance).

Amazon amplified their effort with the launch of Endless.com in 2007. Boasting a far more elegant site than either Zappos or Amazon, Endless featured a UI design that made it feel like an upscale boutique. Endless also launched with a tactic right from Hsieh’s playbook, free overnight shipping on all orders. The tactic was designed to gauge into some of Zappos’ market share.

The result? While it did prompt competitors in the vertical to  redesign their own sites to improve the browsing experience for their customers, Endless gained relatively little market share. .

The problem was that Amazon now had skin in the game and the costs associated with building and advertising Endless were not cheap. It was perhaps Endless’ failure to dethrone Zappos that  made Amazon think of buying. What’s more, Zappos made themselves an appealing target because they were not just beating Amazon at selling shoes; Zappos was beating them in creating buzz.

Zappos had become the corporate darling in the Web2.0 world of transparency. The company had almost co-opted Twitter with hundreds of Zappos employees actively participating in conversations about themselves and the corporate brand. Hsieh was like a rockstar at the forefront of the media blitz from SXSW to Affiliate Summit. Hsieh even started a consultancy targeting the Fortune 1 Million  to teach other corporations the benefits of developing an open corporate culture. Best Buy, Southwest Airlines and dozens of others got in line.

What buzz did Amazon have going? Well they did earn tremendous growth in ‘09 but most of the media focus seemed to be on iterations of the Kindle or on the various affiliate nexus laws, nicknamed the Amazon Tax.

What a Deal

According to TechCrunch,  Amazon brokered a deal with Zappos consisting of $880 million in shares with an additional $40 million in cash. Now $920 million may sound like a lot of money but really is quite a deal with Zappos having posted sales of $1 billion in ‘08. Now Amazon President Jeff Bezos and Hsieh may have struck a meeting of the minds when they met earlier in the year as Mashable claims, but; even so why wasn’t the purchase price significantly higher?

Well, it comes back to those tactics key to Zappos’ customer success. The fact is free shipping both ways and a 365 day return policy, as Hsieh puts it mildly in the BrandWeek interview “gets very expensive”. It’s been long rumored among Zappos’ competitors that the company must be hemorrhaging money. Whether that’s true it is apparent that Zappos’ net earnings were significantly lower than its’ $1 billion gross sales.

Perhaps the biggest winners are the venture capital firms Sequoia Capital and Venture Frogs whose investment in Zappos’ “quirky” strategy paid off.

Potential Impact on the Affiliate Channel

Initial outlook of the deal indicates that things will remain the same in many ways. Zappos will remain in its Henderson, NV headquarters with its brand, operating methods and leadership intact.

Both companies can credit a large portion of their growth to the affiliate channel. Zappos has had an affiliate program as part of the Commission Junction network since 2000 and has consistently been one of CJ’s top merchants. Amazon Associates is one of the first and largest affiliate programs claiming 900,000 members world-wide.

Lately Amazon seems to be systematically chipping away at the channel that helped it achieve its growth. In fact Amazon hasn’t been overly friendly to its affiliates as of late, from cutting commissions, to terminating referral fees for search, and most recently eliminating credit to affiliates using url shorteners in general with Twitter specifically as a target.

Amazon is also at the epicenter of the affiliate tax nexus debate  playing out in legislatures across the country. It has even used affiliates as leverage by preemptively terminating affiliates in some states  in anticipation of new tax legislation.

Zappos meanwhile has enjoyed a fairly positive relationship with its affiliates. The question is if  Zappos will begin to mimic Amazon’s actions in the affiliate channel? Will Zappos leave CJ and run an internal affiliate program like Amazon currently does? How will this impact the Endless affiliate program which is also currently live on CJ?

Final Questions

As with any such blockbuster merger the playing field will change significantly upon completion. There are practical questions to be addressed. Will Endless remain in business or be absorbed? Will Endless become the high end product retailer and Zappos the low end retailer as mandated by their respective UIs? How will they coordinate differing plans and messaging?

Then there are slightly more existential questions. As people, Bezos is very different from Hsieh and in the same way the cultures of their two companies are very different. Amazon is not used to being as transparent as Zappos or, at times, as human. Which culture will survive? Will they be able to incorporate each other’s strengths or wallow under each others’ weaknesses? Management is a big part of this and for the short term Hsieh is staying. After a year under Amazon’s corporate coils will he leave for some other business where he can be “quirky” again?

The fallout will be interesting.

See original here:
Endless Two-Step: Real reason Amazon bought Zappos

Search Engine Keywords:

• amazon endless shoes purchase merger
• endless affiliate
• zappos
• zappos competitors

Tweet This Post

• CRM News: Analysis: The Social Media Puzzle
  (tags: socialmedia)

Continued here:
links for 2008-09-24

Tweet This Post