Non-Linear Thinking Lessons from Freakonomics

Submitted by elias on May 31, 2011 - 12:00am

If you have read the book, you would have probably been intrigued in a very amusing way. The insights and findings are shocking, the relationships and parallels drawn are a clear sign of genius. Very interesting to know certain statistics (like the fact that sending your kid to a friend's house who has a pool is more dangerous than having them go to a friend who's father owns a gun!). Apparently, more kids die drowning in a swimming pool, than from accidents related to guns. The main lesson in all the findings is almost the same. Don't rely on your gut feeling, or any heuristics you may have about a certain decision, but look at data.

Great information, a big hit to our instinctive thinking, and a reminder that the facts can be completely different from what we feel they are.

The problem is that it ends there. You learn the facts and know that you should be more concerned if your kid wants to go swimming at a friend's house. Most of the stuff is like this. It is a great display of genius and insight, but it hands us ready-made facts based on years of study and data analysis. It gives us a fish, but doesn't teach us how to fish. It's just like if I tell you that eating potatoes is more beneficial than you thought, and that research shows that if you have 5 potatoes per week, you are 27.5% less likely to get a heart attack. Ok, so I start eating more potatoes, if I have the discipline, and that's it.

I'm much more interested in lessons that can become tools for thinking and can be used in other situations. I'm interested in becoming a fisherman. 

There was one really valuable thinking tool that I was able to extract, and is really helpful in explaining many personal and economic behaviors. This is basically the non-linear (on non-absolute) way we take positions toward a certain topic.

This lesson / tool struck me through the Sumo wrestlers study. It shows that the wrestlers are willing to lose certain fights in certain situations. When the stakes are high (determining whether or not a wrestler goes down to the lower levels), things aren't as straightforward as they seem. Wrestlers are likely to have a tacit arrangement, whereby "I let you win this time if you let me win the next time I'm in need". Since one of wrestlers doesn't have much to lose by loosing, they gain a future favor from their opponent who is desperate for winning.

The important learning it gave me is to stop dealing with people's positions in an absolute manner. "This consumer is loyal", "this person loves me", "my boss is really into this project", "the company wants me". All these statements are wrong regardless of whether or not they are true in the moment. The reason is that they are incomplete descriptions of the positions of these people.

To complete these arguments, we need to mention the conditions under which they remain true. The company is really into this project, as long as ... is a more complete argument. The 'as long as' part is crucial, because it might get the other person to have a completely different position, even against their initial position, because their incentives have changed.

Tags: 
Books
Freakonomics
Thinking
Strategy

Online vs. Offline Marketing: Whatever you Think, Think the Opposite

Submitted by elias on May 29, 2011 - 11:22pm

Whatever You ThinkHaving dealt with many traditional marketers entering the online world, and having gone through the transition myself, the best advice that I could share with anyone joining this world (and everyone will, eventually) is the title of this book. Whatever You Think, Think The Opposite is a brilliant book that doesn't have to do anything with online or offline, but the advice makes a lot of sense to me because almost everything that we do online is counter-intuitive to the thinking of traditional economics. Paul Arden presents his ideas by using the medium he is best at, advertising. The pages of the books have the structure of an ad. A big image with a headline and some descriptive text. Each page can be read separately without having to read other pages for context. The only difference between these pages and ads are brand and logos. So, me easy advice would be to think the opposite of the way you think. Most of the thinking and planning works the other way round; big becomes small, one becomes many, decide become discover, etc. Here I outline some of the main differences in doing marketing online compared to the thinking offline.

 

 

  Offline   Online
General Implementation: Planing, planning, planning, and then you have one big bang.   Start small, very small, extremely focused, based on results improve, expand, optimize, and grow. Start spending big ONLY when you have good results.
Time to analyze resuts:  Takes several weeks, if not months, needs a different process of a sampled group of people to give their feedback.   Almost immediate results on your campaigns, per creative, per placement.
Restuls Analysis: Based on people's feedback.   Based on actual usage (clicks, impressions, conversions, etc.).
Campaign Analysis:  A separate process, involving additional cost and research.   An integral part of the campaign.
Campaign Cycle:  Ends when the ad is seen, and there is no direct link to the customer behavior based on the ad.    full cycle is measured from impression, to click, to landing pag, to funnel, and finally the 'thankyou' page.
Targeting:  Usually one big market, at best segmented based on medium   Extremely fragmented, potentially every keyword is a segment. 
Customization:  Fixed messages can only be changed in different campaigns or editions of a publication.   Can be tailored to each segment, and can be based on previous performance data. 
Tags: 
Online vs. Offline
Marketing
Books

Marketers and Greed

Submitted by elias on May 28, 2011 - 2:09am

Gordon Gekko teaches us that, "greed is good" in the classic movie Wall Street. It is such a relief to get approval for one of our basic tendencies by such a successful person. He's making a lot of money, and enjoy it after all! I agree that greed is good, with some caveats, but that's a different subject. I was recently accused by a good friend of mine that I'm becoming too greedy, and mainly focusing on generating money, as opposed to being passionate about the work itself, and loving it for its own sake. My response is thatWall Street - Money Never SleepsI'm a marketing person, I do business. And my job is to create / manage products and services that liveor die based on whether or not they make money. We marketers get excited when we find a niche in a certain market, and when we can see that there is hope that what we are offering to this niche is making money. Otherwise, it's just a cute idea, without commercial value.I generally judge ideas based on the value they provide to the ecosystem and the world ito which  they belong, but from a strictlymarketing perspective, the name of the game is to create stuff that people are willing to pay money for.Since our measure is generally how much money (or any other result) we can consistently make we tend to enjoy the process the more money there is.A designer's greed consists in creating something useful, beautiful, and easily understood. The engineer wants to create a great system that is efficient, and works nicely. The doctor needs to do difficult operations, and get higher degrees and specialization.The difference is that if a doctor is too focused on the money, he would probably be compromising something of his work's quality. If an actor or musician thinks mainly about what makes money, then there is the risk of being influenced in that direction as opposed to truly communicate their vision to their audience. This could potentially negatively influence the quality of their work.On the other hand, when a marketer doesn't focus on making money, he is not doing his job properly!

Tags: 
Marketing
Greed
Strategy

The Paradox of Specialization

Submitted by elias on May 26, 2011 - 5:13pm

Being a specialist is definitely better than being a generalist. You can achieve differentiation, you can be the top person / company in your niche, and you can make more money. The problem with being a generalist is that you are obviously good at many things, but not great at one specific. Great, so now you want to specialize, you choose your niche and keep focusing on it, until you really master it. Right? Wrong! The problem with specialization is that you cannot achieve it without being a generalist to begin with. Let say you want to specialize in SEO. First of all you must be good at web analytics, because you will need to analyze the current performance of SEO on your site, and you will need to evaluate how keywords are performing, and based on that take your actions. You will need to understand social media very well, because you need to do link-building campaigns and this happens through content creators, and you will naturally need to win their approval. Paid search is something you need to be very familiar with, because you are probably working with the paid search team in parallel, in order to coordinate your efforts on certain keywords. Most importantly you will need to have a very good business understanding, because at the end of the day, there are business results you are trying to achieve through your SEO efforts. This is very generalist! In any field you need to understand how your specific specialty relates to other specialties and where your role ends and theirs start. In a similar argument, I wrote about the long tail person, arguing that similar to the basic concept of the long tail (lots of small niches amount to a large number of sales), a person who is just good at many things, can group these things together, and having them together in one person serving a specific niche would amount to something great. More on this in the tecnician vs. the marketer, talking about the difference between people who have a good understanding of marketing and happen to specialize in a certain field vs. the people who just learned how to operate a certain product like Google AdWords for example. I still insist, although the Jack of all trades is a master of none, I think the Jack of all trades is a master of some. Specialization is great, but it doesn't come without generalization.

Doing Work vs. Doing Business

Submitted by elias on May 24, 2011 - 3:55pm

It's a very important distinction that many people need to make, especially those transitioning from being employed to owning their own business.

As an employee, you do work, and you are rewarded for that work. Mostly, this happens in the form of an hourly, or monthly payment. Typically, you are selling your time to your employer, and during that time you are doing work. There is compensation for that work, and the concept of rewarding you for a good job done in the long run is one of the most important things. Motivation, the feeling of equality, and being treated fairly are central aspects of the game.

Doing business is a completely different ball game altogether. There are no "rewards" in the employment sense of the word. When you buy a piece of land at $100 and then sell it to someone at $150 the buyer is not rewarding you for holding on to that land, or for having invested, or for anything. The buyer is merely paying what the market price is at the time, and what they can afford and negotiate with you. You just happened to have bought that land at the "right" time and benefited from the difference the market has created. You might have had to sell it at a loss, and that is still none of the buyer's business, it's not even a factor in the negotiation.

This difference might explain the completely different approaches employees and business people have. The "work" that an employee does will not get them more money. In some cases, like sales, it does. But usually nothing happens when an employee saves her company $568,000 by implementing things in a new way. She might get a bonus or a minor raise, or some sort of psychological reward, but not money in the way the business partner enjoyed. It's about doing a good job, it's about advancing your career, and it's about becoming a star in a certain area of expertise that gets the rush for employees.

Business people get most of their adrenaline from making money, being a force in the market, and moving and shaking things. Nobody is there to pat you on the back if you make a good deal buying a cheap land and selling it at a profit. You don't need it! The money gained is your reward, and vice versa if you lose. The actual outcome is your motivator.

Being in business is a much lonelier place. The number of shareholders of most organization is usually a tiny fraction of the number of workers in it.

An interesting case is when you are a business person and doing work for a living, it's an intriguing juggle that you have to make, and you get in a better position if you can productize your service. This way you can have the final say on how you want to do your work, as long as you sell certain results for your clients. For example, software companies sell software in a box. They don't sell you the number of hours it took them to create that software. Although it is accounted for in the pricing, but you just buy a product at a price you can afford, and you are not concerned about rewarding them for doing a good job at creating that product for you. You are simply doing business with them. This way, they control how they want to do their work behind the scenes, and you don't get to interfere with that.

Tags: 
Work
Business

Facebook's Headaches for Google: Part II

Submitted by elias on May 23, 2011 - 3:59pm

I've previously wrote about how Facebook is competing with Google, and it doesn't seem to be stopping. This time from a different angle.

The way this is being accentuated is by the two different types of advertising offered by Facebook; "marketplace ads" and "premium ads".

Marketplace Ads are basically the ads that anyone can run on Facebook, simply by going to the advertising section, posting some ads, and entering payment information. The great thing about this is that it is, similar to Google, catering for the long tail of advertisers. Global companies with huge budgets, compete with mom-and-pop advertisers running campaigns of $10 / month. This is similar to Google's philosophy of creating a democratic utopia in advertising. Everyone should be given the same tools, and access to the same information, which improves the efficiency of, and increases the number of advertisers willing to compete in the largest ad auction on the web.

Premium Ads is where things become different. These ads are run by Facebook, through agencies (a segment in the market Google never had in its equation when they created AdWords). Google treats its platform as an open system where users or agencies are free to use it in any way they want. This has really disrupted the traditional business model of media agencies who struggle to find a viable way of making money out of a system that doesn't give them commissions, is completely transparent, and needs daily monitoring and updating.

Facebook is giving these premium spots only to agencies and to campaigns that run a minimum of $10,000 / month (or at least in my region). These ads are run in the traditional way (IO, booking order, etc..) and are managed by Facebook employees.

Guaranteed placement: part of this offering is that these ads don't go into an auction, and appear on the home page of Facebook, which is the first page a user sees when they log in. The agency books a certain number of impressions, and they get these impressions.

Commissions: to make things worse, these campaigns include a commission for media agencies, which immediately makes advertising on Facebook a sweet option for agencies, who get to talk the language they are used to; premium placement, large audience, the big boys get better treatment, etc...

Demographics: another aspect of Facebook that make it very easy for agencies to deal with. Keywords and interest-based targeting, although much more effective, are still not that easy to grasp due to the extreme fragmentation they create, and necessitating campaigns to become more geared to results and reponse, as opposed to branding, whatever that may be.

Facebook is now the hot thing, they give agencies commissions and premium guaranteed placement, and provide the most accurate demographics any media has ever dreamed of having. This will cause a bigger headache for Google clearly.

From an ecosystem perspective, what this does, is that it widens the gap between agencies and regular advertisers, and gives them an unfair advantage. If they would have kept the same model, without favoring the agencies, they would have made the whole online advertising ecosystem a much more efficient and effective place to advertise on. They decided to go for the business objective. Time will tell which model will win.

Tags: 
Adwords
Advertising
Google
Facebook

Making Billboards Digital and Accountable

Submitted by elias on January 11, 2011 - 9:02am

As most offline media have the limitation of not being accountable and measureable, outdoor billboards can be improved with three simple ideas:

- Make them digital: Since electricity is already connected to billboards for lighting purposed, a new digital screen can easily replace the existing one.

- Go Online: With a simple WiMax adaptor connected to those screens, you can take these billboards online instantly, which helps in managing them through a web interface from anywhere in the world.

- Make it measurable(this is the trick): With a simple speed control camera, you can actually count the number of cars passing by the billboard, and therefore start selling impressions instead of time.

Of course, you can easily argue that you don't know how many people are in each car, and whether or not they look at the billboard.

There is a general average of people per car, and even without knowing that you still know that your campaign received X cars x Y people on average. Also, you can easily assume the minimum of 1 person per car and build the numbers on that. Whether people look or not is next to impossible to measure, and so is the case with online advertising. You cannot know if people looked at an impression or not, but the important thing is that you know that 10 million impressions reach more people than 5 million impressions.

Tags: 
Web Analytics
billboards

A Business Model Based on Data

Submitted by elias on December 26, 2010 - 12:31am

Selling data, pure data, can prove to become a new business model for companies and sites who are struggling to make money or increase their revenues.

Since aggregate numbers about interactions are highly valuable in giving insights on user behavior, the data gives tools for better decision-making for business and marketing people.

Just like the advertising-driven model, where you make money if you have enough traffic, a similar model can be applied for selling data about usage, if you have enough traffic.

The great opportunity is in the fact that the same data can be useful to different clients in different ways and different geographies. Some clients might be interested in behavior related to certain content, and some others might be interested in purchasing patterns as they relate to certain geographies.

Just like market research companies collect one set of data, analyze them, and produce a report which is sold several times, so can websites if they can provide the data in a structured and segmentable way.

Infochimps is a great example of a platform that allows you to sell and buy data, you can even post data for free and share it with the world. This inevitably leads me to think about micro data (personal data) of people. Will a person be able to make a smalll monthly income by just plugging in her own data? Market research companies have always wanted to pay money and collect data about certain types of people, why not automate it? 

Another form is the corporate model. My friend Waseem updated me on the latest generation of viruses that don't do any immediate harm to your computer, but just lie there trying to find patterns of behavior, loopholes in a system, and ways to steal or destry on a larger scale than computers.

Why not a friendly virus? A software that is installed on the company network and collects anonymous data about the behavior of employees. The company collecting the data will have a lot of companies from which they aggregate data and sell them in a structured useful way to various clients. This way you can make money from your employees' "wasting" their time on social networks and chat applications!

Tags: 
Data
Business models

Personal Scalability With AdWords Automated Rules

Submitted by elias on December 24, 2010 - 9:52am

I have previously discussed how a person can be 'scalable' in terms of increasing productivity over time by keeping up with the technological changes.

Google's introduction of Automated Rules is one quantum leap for those who want to make a jump in their productivity.

This quantum leap will require a quantum leap in learning and managing Adwords, as this is not just a new 'small' feature. Using these rules assumes that you are highly familiar with all the mechanics of how the platform works, so you can create automated rules for it. This is a completely different skill, and on a more strategic level.

Advertisers who master this skill will go to the next level of productivity, and those who don't will stay where they are.

On a separate not, this feature serves a good blow to all the bid management companies who provide this service through applications that use the AdWords API. Their challenge is to innovate beyond what Google is currently offering and make sure they are way ahead, in order to survive.

Tags: 
Adwords
Personal Scalability

How Facebook is Causing Big Headaches for Google

Submitted by elias on December 21, 2010 - 7:36am

Emerging as one of the biggest destinations online, Facebook is not only gaining more traffic and money, it is beginning to disturb Google in a very deep way. This analysis is definitely not comprehensive, but aims at evaluating some of the most important activities an online marketer engages in and tries to achieve.

- Community Building:

A very important goal of any website or brand, is to build a community which is basically a group of people who love the brand/site use/buy it frequently, love to talk about it and visit it often. This is done through collecting users' email adresses and getting their permission to receive emails from the site. The user comes to the site, browses, and if they like it they submit their email to 'join' the site. This can be a simple 'give us your email' box or as part of a registration or purchase process.

The right way is to verify these email addresses, by having users click on a confirmation link that they receive (which hopefully doesn't go to their junk folder!)

Every step of the way, you are loosing people, from the form you are using, to the registration steps, to the confirmation email, a certain percentage of users is being lost.

All of these come with a lot of costs; development, hosting, maintenance, design, etc...

- Keeping in Touch:

After you have gone through the painful process of creating a community, you will have to go through the process of maintaining it. This is done by sending out regular updates, emails, tutorials, freebies, offers, and whatever you believe might help you improve that community. This of course comes with a cost, and a lot of effort. The cost of cleaning up your list, maintaining it, and sending emails. The larger your community the more cost is involved naturally. Many companies exist only to help you send emails and manage your community.

AdWords is one the most cost-effective ways of driving relevant traffic and building the community, and you can easily target the right people and optimize for the traffic that converts and becomes part of your community. But AdWords can only help in driving traffic and can help you identify the right traffic.

On your Facebook fan page, and all the ugly processes and operations you have go through are summarized in one click.

Like!

And every status update you do is sent out to all the fans. This functions like an email broadcasting tool, and it is very similar in nature. When we get emails, we only see the subject and the sender. If interested, we click through to read the full story. The same happens with a status update, your fans see the source and see the title. Actually, they see more than a title, because the status bar has more space, and if you have links the images on the destination page will be extracted for you to make it more appealing to your audience.

Not only that, any action that any user engages in with your fan page is broadcast to all their friends. When someone registers or comments on your site, in contrast, nobody knows.

- Long Tail:

The model Facebook is adopting is similar to Google's in terms of addressing the needs of all kinds and sizes of advertisers. A dry cleaner with a monthly budget of $20 can advertise on Facebook, (as well as a multi billion dollar company) and when you have millions of these small advertisers, it amounts to a lot of revenue.

The problem is that Google doesn't have a social platform with which they might hope to compete with Facebook.

What Google can do with this situation is try and get more Facebook developers on board to include AdSense ads in their applications, which they are doing, so they can get a piece of that pie.

 

Tags: 
Adwords
Google
Facebook

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