The Power of Word Of Mouth

December 30, 2010

In 1989 fresh out of university I started a  business with a college buddy.  I remember those early days fondly.  Our business only had a handful of employees.  We worked long hours for very little but we had a great time.  We started out recycling / remanufacturing toner cartridges for laser printers but soon found ourselves selling computer hardware.  Our business grew from 90K in revenue in 1989 to just over 12M in revenue at close of year 1994. We ended up selling our business in 1994 and started all over again in 1995.  We did it again. We built a computer retail business from scratch to just under 15M in revenue by 1999.

I often think back and wonder what could we have done, or not done, in the Social Internet environment of today?  When we started in ‘89 the Internet was just beginning to show it’s potential via newsgroups and bulletin boards (bbs’s for those in the know), we leveraged it to get at the real geeks but only in the most informal of ways.

In the early 90’s everyone felt they needed a computer to “move ahead” or to “make sure their children were not left out” of the coming age of information. The problem was that brand name computers (IBM and Compaq at that time) were out of the price range of most.  Clone computers and computers built from parts were cheaper but the options and configurations were scary for consumers.  People simply didn’t know what to do.   I remember when we sold some of our first computers people would come back and visit and say “what do I do with it now?”  The C:> dos prompt just didn’t do it for them.

We did a couple of things that made us successful.  We installed a software menu with a ton of shareware/freeware  Games, recipes, spreadsheet, word processor, graphics program – some 200 programs in all that we preloaded on every system.  We defined three “packages”, with only a few add on options (printers, mouse, monitor), that would satisfy users. Most importantly we explained why you needed a computer and what it would do for you.

We had a room, maybe 20 X 30, with white boards on three of the four walls.  We had stacks of spec sheets for each of our packages with check boxes for the options.  Customers would come in and we would ask them a few qualifying  questions  and then we would start writing on those white boards explaining the solutions and giving them advice as to what they should purchase.

I remember some days standing  and  talking and writing on the white boards with a couple or a family and by the time I was done presenting I had  an audience of three, four or five groups.  Our little room would be packed like sardines. When the presentation was over one of the groups would place their order and invariably the rest would follow suit.  My business partner and  I would sell 25 systems each at at $3000 dollars a pop every Saturday and week days weren’t too shabby either.

How did that happen.  Was it location? Nope we were impossible to find, hidden away in an industrial area of Saskatoon.  In fact the main reason we hired a receptionist was to answer the phone and give directions. Was it advertising?  Nope. In those early days we didn’t do any. The extent of our advertising was a “highlighted” telephone number in the directory and a small yellow page ad.

Our marketing started as simple, cheap and effective as it gets – word of mouth. We helped people, we became their friends,  and in turn they told their friends.  Even today 20,  years later, walking down the street or sitting in a restaurant, someone will say “Hi Brendan, remember me? I bought my first computer from you.”  Sometimes I remember, sometimes I don’t. One thing I will never forget or underestimate is the power of word of mouth and referrals generated by really helping people and giving them value.

So sometimes I think back, what could we have done given the megaphone of the “social graph”?  How many more people could we have crammed into that little room if people could have used Facebook and Twitter to tell their friends and family?  I know that the opportunity we had selling computers couldn’t co-exist with ubiquitousness of  Facebook and Twitter but it’s fun to think about it.


Yellow Pages Advertising Analysis and a Prescription for the Future

October 7, 2009

I recently attended the Kelsey DMS2009 conference to learn more about they YP space.  There is certainly a lot to learn.   I am very interested in better understanding how the real estate industry’s relationship with YP has evolved over the years.  I am sure that many reading this will have first hand knowledge.  I would appreciate your comments!  Here is the post in its entirety which can also be found on the StepRep blog.

Advertising Industry

Changes are coming to the world of advertising and media.  Given these changes we have immersed ourselves in the world of advertising and in particular the YP space.  Here are some observations, facts, thoughts, predictions and opinions.  We hope you find them interesting.  We’re relatively new participants in the YP business which gives us a unique perspective to develop paradigm shifting solutions for the YP Industry.   If you are an industry participant please feel free to let us know if you think we ‘ve got it right or if we’ve got it wrong – either way we want to know.

The Origins of YP

Sometimes to understand something you have to go back to its origins and roots and looking to the origins of YP explains a lot.  Back in the early days of the telephone in North America, Governments passed legislation requiring that white page (Telephone books) be delivered free of charge to every land line address.  Today (with few exceptions) this law is still on the books.  This allows YP companies to work in conjunction with Telco’s to either combine the yellow pages with the white pages or at the very least piggy back delivery.

There was a time when the Yellow Pages were everything.  In this time before Internet there were few ways for consumers to find businesses and services they needed.  They could ask a friend, check the newspaper, listen to ads on the TV and radio, see a billboard or bus sign, or, they could pick up the Yellow Pages where they could “let your fingers do the walking”.    The truth of the matter was that for most business categories the Yellow Pages were a must have, and so for years, the cost of Yellow Page advertising was almost inelastic.  Businesses were born and thrived, at least to some extent, on the strength of their position and size of their ad in the Yellow Pages.   As an advertiser you could not reduce your spend or you would lose your important position at the front of the directory.   To be sure, the Yellow Pages produced real, valuable and tangible results for businesses.  An ad in the Yellow Pages connoted trust and consumers turned to the Yellow pages to find business and services they could trust. Consumers used the Yellow Pages because they were the easiest, fastest, most complete and trusted source of information.

YP Industry Today

Today things have changed.  The Internet has become the ubiquitous and de facto starting place for global and local search.  Consumers prefer the Internet because it makes search fast, efficient, mobile and is increasingly convenient. Most importantly it has become the most information rich and trusted source of information.  An Internet search can provide more and better results.   Results have richer information like maps, directions, hours, descriptions, photos and videos.  Most importantly Internet results provide trust.  Ads in the Yellow Pages are simply words created by the advertiser.  Internet results provide expert reviews, peer ratings, rich content like photos, videos and descriptions from customers.  These are things that print alone cannot provide.  The Yellow Pages were once considered as the most complete source of business listing data but this is no longer true.  For these reasons consumers are migrating online at an amazing and increasing rate.

As consumers migrate online both advertisers and publishers follow.  Traditional media have made attempts to create online properties but have generally failed to innovate and leverage the benefits of the Internet to their greatest advantage.   They are impeded by valid concerns such as cannibalizing traditional revenue while maintaining or growing their current share of SMB (Small and medium businesses) advertising dollars.   Further, traditional media organizations are saddled with infrastructure costs, outdated pricing models, and publishing cycles that true pure play Internet advertising plays need not consider.

The current state of the economy has only added fuel to this fire.   The economy drives advertisers to question the value of all spends and media spend are no exception. The transparency and pay for performance nature of online media is raising expectations for accountability across all media.

This environment has caused traditional media revenues to decline and most markets are experiencing consolidation and rationalization as they struggle to find ways to maintain their share of current advertising revenue from SMB’s.

As seems always to be the case, the impact of the Internet on an Industry is overestimated in the short run but underestimated in the long run.  This holds true for YP and we believe that any revenue gains for Yellow Page print media are due to inertia.  Customers are not just moving online, the fact is that most have already moved online and will continue to do so to the detriment of print.

It should be noted that there are a number of stats that indicate that consumers still use the Yellow Pages when it comes time to purchase.  We suspect, and anecdotal observations confirm, that consumers still use the Yellow Pages from time to time as a method of phone number lookup, that is, in the same manner as the white pages, but not as a method of discovery or choice.

The Yellow pages to date have only just begun to feel the sting of advertiser’s migration to online advertising sources.   Some, unbelievably, still attribute the revenue decline to only the current economy.   A few others hold on to revenue growth, obtained through innovative sales techniques and a well trained  cadre of feet on the street sales people, as proof positive that no such online migration is occurring.  However, the majority of Yellow Page operators at the C level are savvy business professionals that can read the writing on the wall and understand the sea change taking place, even though they may lack the motivation or tools to make the necessary changes.

How the YP Industry has reacted

All of this would seem to point to a dismal future of the YP industry, but there are some powerful positives.  Decades of being the heavy weight incumbent for SMB’s advertising dollars have left the YP industry with some very valuable assets.   The YP industry has perhaps the largest, best trained, motivated and skilled advertising sales force in existence.  For decades they have established and cultivated relationships with SMBs.   It should be noted, too, that Yellow Page advertising for many verticals or segments still works and has a very positive ROI.  While many business segments, such as travel, have all but disappeared from YP other segments have grown.  The YP sales force has done a great job of targeting and cultivating high value segments such as legal and dental.

YP has also begun to embrace accountability.  The use of “Pay for performance” call tracking once only used for non-traditional and rescue accounts has now come into general use in many areas.  The sales process has become increasingly multi product, digital and explicitly performance based.  Many YP sales teams are leveraging their relationship with SMBs and are embracing a consultative sales approach and delivering a wide range of products such as SEM, SEO, web presence, analytics, and reputation management tools.  At the same time YP companies are very interested in developing self service models for low value segments as consultative sales is costly and labor intensive. If you buy backlinks – you understand it’s not difficult to tell the difference in quality between proper, natural content backlinks and some Fiverr gig.

On the consumer front, YP has done a better job than their newspaper counterparts.  They have migrated online faster and have begun to embrace user generated content such as photos, videos and ratings and reviews to improve the consumer experience but still lag far behind their pure play Internet counterparts and particularly in verticals such as real estate and automotive.   YP has not truly embraced the “Social” aspect of the web beyond providing links to share or publish via Facebook or perhaps Twitter.  The true value of Social Context has largely been unexplored. YP has done a decent job of leveraging their mass of local business data to provide mobile solutions but could still do far better particularly with respect to location and social context.

Prescription for the future

Clearly the advertising spend for SMBs is changing.   This August for the first time the number of SMB’s using the Internet to advertise (77%) was higher than the number of SME’s using traditional advertising (69%).   However, the full weight and enormity of this has not yet been felt as a disproportionate number of dollars were still attributed to traditional advertising. That, however, is about to change.  In fact, Internet Advertising which is currently the third largest spend is expected to surpass the Newspaper spend before 2013 – Newspaper currently being the biggest advertising spends overall today.  Unless Newspapers react with products other than print, we think this day will come as early as 2011 or 2012.

Much of this shift is happening as SMB’s shifting their advertising spend from traditional media  to their own online presences, pure play verticals and Google adwords.   The YP industry is in a truly unique position to take advantage of this opportunity and potentially even grow their share of SMB advertising spend.

A successful future for YP will include evolutionary changes such as transitioning online to IYP, embracing transparency, pay for performance, user generated content, publishing cycle changes, pricing model changes, and sales process changes. However, revolutionary change will need to be embraced to truly seize the opportunity. The YP industry will need to think back to their origins and rediscover the essence of what made them the most valuable source of advertising to their customers.  Before the Internet the Yellow pages were:

  1. The most trusted and complete source of business information.
  2. A business model that was incontrovertibly the best ROI available.
  3. The most convenient, fastest way to engage local businesses.

Here is our prescription on how Yellow Pages can attain the above:

  1. Become the most trusted source by providing Social Context to consumers visiting the directory.
  2. Become the most complete and richest source of business listings by allowing all businesses to provide complete and rich data and participate in the online directory for free.
  3. Provide an incontrovertible ROI by embracing a new advertising model in which advertisers set their own advertising fee and only pay based on a successful transaction, and, use this model to leverage the advertisers spend on their existing web presence.
  4. Become the most convenient, fastest way to engage local businesses by providing consumers with an Interactive system to communicate with advertisers on a one to many basis.

We would be remiss if we did not tell you that VendAsta has developed the set of tools that can help YP companies do exactly that which we have described.

Using the VendAsta platform the Yellow Pages can once again attain this position of advertising dominance.  Yellow Page companies have both the sales force and means to take advantage of the shift of advertising dollars from traditional print to online models.


Cool (And Smart) New Google things

April 21, 2009

In the last few days Google has announced some really cool things.  The most significant is that Google is leveraging their search engine dominance to give their Google Profiles (see mine here – Brendan’s Google Profile )   

So here is what Google is doing,  They have  begun to show Google profile results at the bottom of U.S. name-query search pages.  So when you, or someone else searches your name they will see abbreviated information from Google Profiles at the bottom of the search results. The more complete the profile, the higher the chance yours will show than other people with the same name. 
So in effect Google is leveraging their search power to compel to fill out a complete profile.  This makes sure they have a relationship with you and know  about you – something that is very important to Google.  This is smart.
You can read more about this on the Official Google Blog                

                                      
On the lighter and, for most people that aren’t identity geeks like me, cooler is the new Google Labs .  It is now powered by Google App Engine.  I just love how Google easts their own dog food.  However, it’s not the labs itself that is cool but the two latest experiments.  Google Time line and Similar Images.  The Time line is cool but it is the similar images that really gets my juices flowing.   Check out this search for Kitchens and this one for kitchens but using the red color modifier.  You get the idea.


Graphing Social Patterns East Recap

June 19, 2008

I was working on a post to recap GSP East conference.  However, I just noticed that Frank Mashraqi of Fotolog posted a great recap.  So I am just going to link to it here.


New Inman Site Strategy Explained

April 24, 2008
I have always been a fan of free and providing value . Done right this doesn’t mean you  can’t make money (maybe you can even make more).   I really like the idea of transforming a paid subscription (web 1.0) into a paid social network (very web 2.0).   I like what Joel and his team have done with the Inman News site.  Joel talks about the obviously well thought out  strategy and execution here.  Congrats guys!
 
Joel, nice tips on reputation tracking btw.  We have some free value of our own coming soon at Vendasta.  🙂

Realtor Ratings and Reputation 2.0

March 19, 2008
Last night I posted a video on Reputation 2.0 and Identity 2.0  we made on NoMoreDoorKnocking and am getting a lot of email from people asking me questions.  Jay Thompson posted it and Joel Burslem included it in a very interesting discussion on Identity 2.0 and the real estate industry.
The crux of the discussion is that there there needs to be a way to rate real estate professionals.  Personally, I say why relegate the conversation to one industry when all service industries need it, but for the sake of this discussion let’s stick to Realtors.  Most of them are stuck with a rap they don’t deserve.
Joel raised an interesting point about this issue:
“But as much as I cheer these entrepreneurs coming in and providing solutions to the issue of Identity 2.0 – I can’t help but wonder, shouldn’t this be something the industry takes the lead on? Give us a way to rate, rank and review your membership. Especially if it were done in a totally transparent and honest manner, so the rating was not up for abuse or gaming. I’m convinced this is something that NAR or the local Associations should get behind.”
Frankly, the Industry doesn’t have the tools or the fortitude to tackle this problem and their governance structure is such that it is almost impossible to effect any change let alone controversial change.
I have some personal experience with this issue. Last July at the Inman connect conference I was on a panel with Bob Hale, President of HAR(Houston Association of Realtors), in my view the most progressive MLS around (Check out the Realtor search)  He talked about his plan for public agent ratings. I suspect that Bob will not be able to make this happen and if  Bob can’t get his done no other MLS will come close.  I also presented at the Bernice Ross’s  Really awesome Women in Real Estate last spring.  I was asked if I supported Agent Ratings and had to answer no.  When I sat down I was soundly scolded by Leslie Appleton-Young, Chief economist for CAR.
So why did I say I didn’t support agent rating?
Well, I believe that for the most part REAL ESTATE PROFESSIONALS are not scared to have their reputations exposed, maybe those who buy properties for cash might have reason to. However, they are scared of a rating method that they don’t understand and into which they have no insight or control. They know that online, identity is a sham and can be “gamed” as Joel put it. And let’s face it, who wants to be “rated”?  What the heck does that mean?  Rated on the basis of what?  Good looks? negotiation?  How can I rate negotiation skills if I am a poor negotiator?  What one customer loves another will hate. For these reasons, rating qualitative skills with a quantitative number is scary.
These are the reasons, when asked directly, “do you think rating Realtors is a good idea” that I said “no”. What I do believe in is exposing the Identity and Reputation of Realtors to potential customers.  What customers desperately desire is insight into the type of person they are about to contractually entrust their biggest and most important asset – their home.  It’s simply not fair or accurate to boil down this insight and information to a “rating”.
So, you might ask, how do we establish Identity and transparency and honestly provide this insight into a Realtor’s reputation?  Offline you might interview three or four of hisor her last customers.  Or you might rely on designations from  NAR, CRS, ABR, GRI and the myriad of associations and boards that have all gone to great lengths to ensure that their members are reputable.  However, the fact remains that there are some bad actors in the group and reputation online is different than reputation offline (make sure to watch our video below).
Fortunately there is an answer for online and offline Identity and Reputation.  In my mind, Identity and Reputation are inextricably tied to a person’s social graphs – think Reputation 2.0.  Offline relationships are being explicitly mapped online or can be extracted semantically from the web.  In effect, this is going to allow for the mapping of peoples social graphs.  You can’t “game”, fool, or fake your Social Graph.  Everyone has a social graph.  Defining, making transparent and allowing for easy interaction with any social graph will provide a consumer with what they so desperately crave – information.
Reputation 2.0 combined with Identity 2.0 is something that we can all get behind.  It’s better than ratings. It’s real, it can’t be cheated or faked, nobody has to “sign up” (everyone has a social graph), Realtors understand its offline or analogue version, it gives customers more information and a better basis for choosing on a Realtor.  As always, the best always come out on top.  With the Internet it is just going to happen faster.

AOL Buys Bebo

March 14, 2008
So AOL purchases Bebo for 850 Million – cash.  For those of you that don’t know Bebo is the number 4 social networking site in the world.  Bebo is huge in Europe and has a big base of users in California.  Not to long ago Microsoft purchased a tiny stake in Facebook with a 240 Million dollar investment. 
For sake of comparison AOL purchased Bebo for $21 dollars per member.  Microsoft’s investment in Facebook valued members at $204 dollars each.  Newscorp paid about $26 per member when it acquired MySpace. 
Why all the fuss about social networks?  Because, simply put,  Social Networking is going to an integral part of the “next big thing”.  More to come from VendAsta in the very near future.

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