April 2007

“User Friendly” comic on Modafinil.In an article with the tantalizing title Double your userbase with two lines of code and a box of Modafinil, Alex Krupp takes a look at Bob Kraut’s study on Usenet and how getting a reply affected the chance that a poster would return and post again:

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

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

Based on this observation, Krupp suggests that a good way to increase returning visits and user participation would be make a simple change to your site’s design:

Now, translating patterns in Usenet posts into practical design advice isn’t an exact science. But if I were launching a new website, here’s what I’d do. Instead of hiding the Feedback link in the upper right hand corner, I’d place a form right on the main page. A big form. And I’d bend over backwards to get people to use it.

Bugs, ideas, comments, observations, advice, etc. It doesn’t matter. Why? Simple.

Because by emailing you, your visitors are giving you permission to send a reply. A reply that, if crafted correctly, could dramatically increase that person’s chances of becoming a full-fledged member of the community.

Note that Krupp says that the reply must be crafted correctly. By this, he means that the reply should be personal and not a form letter with the user’s name pasted in. He suggests “a friendly personal letter from the CEO”, a task so time-consuming that it explains the use of Modafinil (an anti-narcolepsy drug that many geeks say gives you the ability to work non-stop for extended periods of time) in his article’s title.

Krupp’s theory is supported by Facebook’s success. Although nobody at Facebook sends you a friendly personal email, the site does something that yields a similar effect: it starts feeding you a constant stream of goings-on concerning your friends. This feedback is just as personal and even more relevant to you (and possibly less creepy) than some CEO you’ve never met trying to get chummy with you via email.

Krupp’s theory also suggests an experiment that you might want to try if you have a blog, mailing list or discussion forum: try replying to every  posting made by your readers or users and see what happens. I think I’ll try it with my blogs and see what happens.

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A couple of notes on social networking:

Reports of Social Networking’s Death are Greatly Exaggerated

In a blog entry titled Is social networking dead? Nope. We’ve only just seen the beginning. Here’s why, Alex Krupp does some good thinking about social networks and how they currently lack credibility. One particularly good observation he makes is that social networks can connect people in three ways:

  1. Strengthening existing relationships
  2. Connecting friends-of-friends
  3. Introducing complete strangers

He uses Facebook, LinkedIn, MySpace as examples of sites that strengthen existing relationships through information sharing, but differentiate themselves by focus and the type of information shared — “For example, MySpace uses the musical tastes of others to facilitate the discovery of new music,” whereas LinkedIn is used primarily for career-type networking.

He has this advice for creators and investors hoping to create the Next Big Thing in social networking:

Each of these sites facilitates only a tiny fraction of possible human interaction. Which is why creating “Facebook but with emoticons!” or “MySpace but for for the Amish!” is so silly. Facebook and MySpace already do a great job in their respective niches, and it would be very difficult to unseat them. And since there is so much potential in the yet unexplored possibility space, it makes no sense to even try.

There is a lesson here for venture capitalists as well. Sure, the vast majority of pitches for new social networking sites may be terrible. But that doesn’t mean the possibilities for creating value have been exhausted. The next two guys to show up on your doorstep just might be a little less dumb than you think.

10% of Toronto is on Facebook

According to Ryan Feeley, the number of people on Facebook claiming Toronto as their home has crossed the half-million mark, or about ten percent of city’s metropolitan population. From the data below, you can see that Facebookers — of which I am one — make a much bigger portion of the population of Toronto than New York, L.A. or London.

City Metro Population Facebook Members
Toronto, Canada 5,113,149 +500,000
London, UK 7,554,236 338,188
New York City 18,818,536 206,228
Chicago 9,505,748 195,410
Vancouver 2,116,581 159,947
Los Angeles 12,950,129 102,130
Calgary 1,079,310 90,859
Philadelphia 5,826,742 90,091
Montreal 3,635,571 82,922
Houston 5,539,949 69,682

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SUpermodel Linda Evangelista, c. 2004.Search Engine Land points a to a report stating that Google is now the world’s most powerful brand, as ranked by Millward Brown Optimor’s BRANDZ Top 100, with a brand value of $66.4 billion. Here are the top ten brands, listed along with their brand values:

  1. Google ($66.4 billion)
  2. General Electric ($61.9 billion)
  3. Microsoft ($55 billion)
  4. Coca-Cola ($44.1 billion)
  5. China Mobile ($41.2 billion)
  6. Marlboro ($39.2 billion)
  7. Wal-Mart ($36.9 billion)
  8. Citigroup ($33.7 billion)
  9. IBM ($33.6 billion)
  10. Toyota Motor ($33.4 billion)

Also worth mentioning: of the top 40, the three brands with the biggest increase in value over the past year pretty much make up George’s and my lifestyles:

  1. Google (brand rank 1, up 77%)
  2. Apple (brand rank 16, up 55%)
  3. Starbucks (brand rank 35, up 45%)

Did I really need a brand research company to tell me that Google is the number one brand? I suppose you can’t be ceratin without doing research and number-crunching, but I decided that Google had simply and complete won, period, a couple of years back while reading a magazine while waiting to get my hair cut. I was reading an interview with supermodel Linda Evangelista (pictured above) in which she says “Oh wait, let me Google it.”

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Monday the 16th for Google

by george on April 16, 2007

Monday the 16th seems like a good day to reflect on Google’s Friday the 13th purchase of DoubleClick for $3.1 billion in cash. People are already calling this tie-up a nightmare for Microsoft (rumored to be the jilted suitor for DoubleClick’s affections). Is the story really that gory for Microsoft (and, for that matter, Yahoo!, AOL, and everyone else going toe to toe with Google), or is Google bleeding money for no good reason?

What makes sense about this deal? Combining the dominant provider of auctioned keyword, search-based cost-per-click (CPC) advertising with the leading vendor of traditional web ads sold on a cost-per-thousand (CPM) impression basis. Others have pointed out that both companies bring a wealth of behavioral data together, with the assumption that Google’s eggheads can sprinkle some science stuff around to focus display ad targeting.

Google was bound to get into the display ad business, and rumor had them building their own ad serving technology. As BusinessWeek notes, while Google’s stronghold in search has been the hotness in internet advertising, it still accounts for a minority of the total online ad market.

Paid search advertising will account for more than 40% of the $19.5 billion expected to go to online advertising this year, according to a Mar. 7 eMarketer report. Google grabs about two-thirds of the search advertising market. Much of that growth has stemmed from the ability of search engines to find consumers who have demonstrated an interest in a certain product.

Display advertising, which is often broken up by the medium, has not been as vibrant as search in recent years. In an October report, eMarketer put the display advertising number at $3.34 billion for 2006 and expected it to grow to $4.5 billion by 2010. Meanwhile, paid search advertising accounted for $6.76 billion of online ad spending in 2006 and was projected to grow to $10.3 billion by 2010.

In other words, search may be growing, but it isn’t the whole internet advertising story. Just as Google purchased YouTube to get a seat at the table of the internet video ad game, owning DoubleClick gives them an entrée into the display and rich media advertising the big brands love.

There are two major sets of customers in the internet ad game: publishers and advertisers. All of the internet ad companies try to serve both, but nobody’s equally good at playing both sides of the game. DoubleClick’s business is advertiser-heavy: selling software as a service to agencies and major brand advertisers, allowing them to control their campaigns across multiple sites. They’ve been working towards a cross-channel story for advertisers (banner, rich media, email, search and performance marketing), but (like everyone else) they’re not there yet. DoubleClick is a Frankenstein’s monster of channel-specific technology. Their secondary business is serving the publisher market, allowing destinations to manage their ad inventory. Google + DoubleClick combines the #1 seller of keywords to advertisers with one of the largest sellers of display and rich media to advertisers (although aQuantive might dispute that). From the advertiser’s perspective, Google becomes a one stop shop for most of the online advertising enchilada.

Nevertheless, this is an eye-popping multiple to sales, regardless of the strategic sense the deal makes. Reports I’ve seen have DoubleClick generating an estimated $300 million in revenue for 2006. DoubleClick’s major rivals, however, are reporting some pretty big numbers themselves: ValueClick at $545 million, aQuantive reported $442 million, and even my erstwhile corporate masters at 24/7 Real Media booked $200 million for the same period. None of these are perfect comparables; 24/7 runs an ad network and aQuantive owns an agency, two lines of business that DoubleClick has either jettisoned or shunned. So with these other companies still in play, is this really Armageddon for Microsoft’s ad business (and why isn’t anyone talking about how this deal is Bad, Bad News for Yahoo!? Surely YHOO + DCLK would have been a story Terry Semel would have enjoyed telling).

That’s what mystifies me about all this. I get that Google wanted to ace Microsoft, Yahoo!, AOL and others out of acquiring an asset like DoubleClick, with their combination of relationships with both advertisers and publishers. But why can’t Microsoft take a drive across town to visit aQuantive (hypothetically speaking, of course)? They could even swing a deal where they spin off the agency part of the business (Avenue A/razorfish) to one of the major ad agency holding companies and, hey-presto, they’ve subsidized their acquisition of a very competitive advertiser-side display ad business (and one with good advertiser relationships). Armageddon averted.

Dollars aside for a second, buying DoubleClick made sense for anyone trying to establish broad leadership in the online ad business, including Google. But you can’t lay that price aside for more than a few moments in this case—$3.1 billion is positively vertigo-inducing. Google has a mountain of cash, and will be adding to that pile at a furious rate, but Microsoft is more than their equal in that regard. Moreover, there are good assets still around to be had.

Blowing nearly 30% of your cash stash on a single deal had better bring more than just increased speed to market—it should be a knockout blow to the competition.

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Apple’s fallen, but it’ll probably get up

by george on April 13, 2007

Just after the good news that Apple’s sold nine digits of iPod (I’m still guessing that they crossed that mark in April, as I predicted here), the company comes out with the bad news that they’re slipping the next version of Mac OS X, 10.5, better known as Leopard. According to the New York Times,

Apple Inc., the computer and consumer electronics company, said Thursday that the introduction of the new version of its flagship Macintosh OS X operating system would be delayed as much as four months because of quality issues.

The company previously said the program would ship this spring.

The uncharacteristic schedule slippage is particularly embarrassing for Apple, which is based in Cupertino, Calif., because it had previously poked fun at Microsoft’s struggles to complete its Vista operating system.

If you think slipping an OS release four months is just as bad as slipping it two years (while shedding previously marquee features like an all-new file system), then, yes, I guess Apple’s embarrassed.

Here’s Apple’s terse—and oddly informal—official statement on the matter:

iPhone has already passed several of its required certification tests and is on schedule to ship in late June as planned. We can’t wait until customers get their hands (and fingers) on it and experience what a revolutionary and magical product it is. However, iPhone contains the most sophisticated software ever shipped on a mobile device, and finishing it on time has not come without a price — we had to borrow some key software engineering and QA resources from our Mac OS X team, and as a result we will not be able to release Leopard at our Worldwide Developers Conference in early June as planned. While Leopard’s features will be complete by then, we cannot deliver the quality release that we and our customers expect from us. We now plan to show our developers a near final version of Leopard at the conference, give them a beta copy to take home so they can do their final testing, and ship Leopard in October. We think it will be well worth the wait. Life often presents tradeoffs, and in this case we’re sure we’ve made the right ones.

Comparisons with Microsoft’s ability to ship major OS releases aside, there’s really no good way to spin a slip, but some Infinite Loopoligists among the technorati have gone overboard in their bearishness, calling this slip evidence that the iPhone is in serious trouble, and that Apple’s taken its eye off their core business in computers.

To be sure, slips are bad. For one thing, Apple’s losing a quarter’s-worth of software sales revenue at best. At worst, they may experience a pause in computer buying as users hold off on upgrades until Leopard’s released (after all, who wants to buy a $1,000+ machine, pace Mac mini, only to have to shell out $150 for an OS update a couple of months later?), slowing down revenue they might otherwise have booked. For another, a slip is a measure of last resort. Before you slip, you cut. Apple’s probably down to the bare minimum of new features they can get away with while still calling Leopard a major OS release, and they’re still having problems getting it all in the can. Good thing a bunch of the features are still secret!

Even so, to say that any of this augurs badly for the iPhone is rank speculation. Apple may, or may not, be shifting last minute software engineering to their mobile device. For all we know, the resources “borrowed” from Mac OS for the iPhone have been tasked to the project for months already. We can only wait and see.

What’s more, dividing the iPhone and Mac OS X efforts ignores the fact that we’re still talking about the same core operating system. Here’s where things have really changed for Apple over the last year: Apple has gone from a simple client/server OS split (with the iPod’s OS as the adopted child, drawn from a different gene pool) to a much more complex family tree. The iPhone and Apple tv (which also slipped, but that could have been for manufacturing reasons) both have Mac OS X at their core, too. The Leopard project has implications for more than just the computer side of Apple’s business. That makes this OS iteration a huge change for Apple; they’ve never had so much at stake on a software engineering effort.

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The inbox of the Empire’s worst engineer

by george on April 13, 2007

Clearly Joey and I are busy enough that we’re having a hard time with the care and feeding of the Nerdy. Why don’t we start light, and open with a joke this Friday night?

Hey, kid. That trash compactor you designed is up and running and I’ve got to say it looks great. Lots of grime, a magnetically sealed hatch that can’t be opened from the inside, a tentacled garbage creature that practically serves no purpose at all. It’s got everything a salty old janitor could ever want.

One thing, though. It takes an awful long time to flatten garbage. I’m talking a minute or more, depending on how many flimsy poles I toss in there. If our capital ships can boogie at faster than light speeds, why can’t we make a few walls slide toward one another at a speed that outpaces a Hutt’s leisurely stroll?

From the inbox of Nardo Pace, the Empire’s worst engineer.

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Yes, Global Nerdy is an ongoing concern. The blog’s been silent this week thanks to our work- and life-based commitments. More posts are coming!

In the meantime, please enjoy this op-ed graphic from yesterday’s New York Times that illustrates the life cycle of a blog post:

“Diagram of a Blog” op-ed art from the April 4, 2007 edition of the New York Times.

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