Digital Media

How This Low-Tech Founder Got A High-Tech Startup To House $150M In Transactions

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In a market like this where it’s relatively easy to raise capital at higher valuations, it can be tempting to spend big on customer acquisition. This environment has led to recent conversations around high burn rates and the relationship between “Capital and Success.” But some startups are realizing that overspending on customer acquisition may not lead to the return they are looking for and are instead finding different, more cost-effective growth strategies.

In just two years, Sweeten, a New York City-based virtual matchmaking service for homeowners and renovation experts, hit $150M in projects posted on their marketplace driven by one of the cheapest forms of customer acquisition: content marketing.

sweeten homepage

Under enormous pressure to post gains in the $12B NYC renovation space, Sweeten CEO and founder, Jean Brownhill Lauer, was initially tempted to spend on obvious advertising purchases. Surely, targeted advertising would bring homeowners looking for hand-selected general contractors and designers to the site. Instead, Lauer has bet big on a different approach: creating in-house content that gets serious traction with zero customer acquisition costs. Adhering to a strict no-paid-advertising model, Lauer’s team is using original content to drive social media activity and partnerships with widely-viewed shelter and design sites, drawing prospective customers to the site more organically.

In-house content over paid advertising

“We started with big ideas but severely limited capital,” Lauer said. “When we looked at our budget and tried to envision parting with funding to cover advertising costs, we knew we could get clicks and site visits but probably not much else. Instead, we’ve watched as our investment in high quality and highly visual in-house content has drawn those same clicks and site visits through collaborations with industry leaders, and at the same time, has been a particularly powerful tool in establishing relationships and trust with customers.”

For a company trying to bring trust and structure to an unwieldy market, this outcome is in many ways more important than page views.

Regular, reliable content

Sweeten’s blog features two key categories of regular content.

The first is fairly typical “before and after” photos that show how the site connects homeowners to contractors who are uniquely suited to a project’s budget, location, and style. The second is content that digs deeply into questions around the renovation process that most homeowners face.

This combination of content is attractive to both a design-savvy urban audience as well as actual homeowners who are desperately looking for reliable information before spending significant money on their own home renovations. In both cases, this content is relatively cheap to create and has a high return on prospective customers and users of the site.

Content partnerships and social conversations

In today’s world of Instagram, Pinterest and other ‘photo-first’ platforms, users continue to demonstrate an increasing demand for quality content. As Lauer said, “We’ve learned that quality writing and photos seem to be constantly in demand – there is this insatiable appetite for design gorgeousness and trustworthy information.”

And to prove it, Sweeten’s photography has generated a not-insignificant social presence with 160K followers on Instagram.

“The Instagram crowd loves our design perspective and actual homeowners are coming back to our site for guides to renovation pricing and regulatory insight that they need to feel ready to start a transformative renovation.”

Lauer is now focused on getting the most out of the content: tailoring it across social media platforms and building it into the site so that customers are getting personalized information as they use the marketplace.

Lauer is also seeing that investors are paying attention to the content cycle; “Our investors want to see site traffic and transaction growth, and they love the fact that we’re able to garner this kind of volume with zero acquisition costs. When you pay for a click, you might get that one click and then the interaction is over. When you create great content, you can get thousands of clicks and use that piece over and over again.”

More and more companies are beginning to realize the value of content over paid advertising.  Sweeten is just one example of a startup that is realizing this and for them, the result is over $150M in transactions.

The $2.3 Billion Business Model – How Content, Community and Commerce are fueling these companies.

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A new breed of business model is emerging which combines content, community and commerce to dramatically improve the consumer discovery and shopping experience online. Sites like Houzz, Polyvore, and Motoroso are putting themselves at the center of their industries using this “Trifecta,” a moniker applied by Mary Meeker of KPCB in her 2014 Trend Report.

Why is this?

Consumers rely on three factors when making purchasing decisions: content, community, and commerce. Content for inspiration and information; Community for social validation and recommendations; and Commerce for making the purchase. Today the landscape of the web serves all of these needs from every imaginable angle and from millions of fragmented sources. This results in a lengthy and frustrating experience for the consumer. Amplified by the massive adoption of mobile, consumers are increasingly demanding seamlessly integrated experiences that combine these 3 C’s.

This concept seems to be working well. Five years into its life, Houzz recently made news by fetching a $2.3 Billon valuation and appears to have become the definitive online resource that combines design inspiration, products, and service providers in the $300B home remodeling industry. Polyvore has revolutionized fashion by enabling community contributors to curate and drive sales of fashion, propelling it into the limelight and attracting over $22 Million in venture capital.

It’s not unimaginable that companies like these will rise to become powerful forces at the center of many different industries. One such business focused on the automotive industry is Motoroso. Released in beta just 2 months ago, Motoroso features over 100 official brand profiles from leading auto and motorcycle brands, including Ducati North America, Porsche, and Volvo.  Ducati North America Online Marketing Manager Patrick Flynn says: “Motoroso is an excellent online platform for Ducati as it allows the distinctive designs of our products to speak for themselves. It’s a welcome addition to our online marketing strategy.” Volvo Cars of North America’s Head of Social Media, Rahul Mahtani states “Volvo is in the process of a major brand transformation and Motoroso provides a unique channel to showcase the evolution of our products visually, as well as demonstrate our commitment to innovation.”

Porsche 911 GT3RS
Porsche 911 GT3RS (Photo credit: Axion23)

I sat down with Motoroso CEO Alex Littlewood, he says “We live this lifestyle, so we know how painful it is to discover and shop. We’re here to create a better experience for everyone in this industry.” In regards to launching Motoroso he adds “We’re starting with enthusiast niches and lifestyles, because they’re the influencers that drive the larger industry trends.”

While Houzz, Polyvore, and Motoroso seem poised to become powerhouse companies in their respective industries, it will be exciting to see which other major verticals or lifestyles will see similar business models applied. Sports, travel, food, outdoor, education, and pets could all benefit from sites that serve their industry this way.

Facebook F8 Changes Solidifies Social Infrastructure for the Web

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The recent changes announced at Facebook’s F8 conference solidifies their place as the first real social infrastructure for the web and this is very important for a number of reasons. At a high level, it’s important to understand that technology innovations alone are meaningless. What matters is how new technology advances or enhances previously existing technology. People refer to this as a “technology stack.” Consider the time when Benjamin Franklin unveiled electricity. Only until wires were installed across the country were we able to first leverage his invention in new ways. Once we had electricity, people were able to build up the stack and create new devices and technologies on top of one another.

Fast forward a bit to the computer age. Computers came out and made math computations a simple task. Then software came along and made the hardware that much easier to use. Again, building up the stack. Then came the internet which connected computers with one another across the world. Another layer called Google made it even easier to navigate information through this complex network and this changed everything. For the first time people were able to go to a little box and tell a machine exactly what they were looking for and the machine, would in turn, give us the results we were seeking.

And now we have Facebook and their recent changes. This is a company that built its core assets by having people tell them exactly who they are. And yesterday, Facebook made these assets open for the world to leverage – a true social infrastructure on top of the web. This could be equally as important, if not more important than Google. This is also why Google is publicly concerned about Facebook’s growth. Consider the widely popular phrase, “it’s not what you know but who you know.” At a physical level, this saying could be transposed to “It’s not Google, but it’s Facebook.” And there are very real implications here that extend to all facets of our society from news and entertainment to e-commerce and travel. We are at place where third party apps and companies can leverage an already existing infrastructure to build businesses and efficiencies in new ways. This is a new part of the technology stack.

Spotify, the new music service, is the quintessential example of this and it’s probably why Facebook included them as a partner during their F8 event. If you think about how you listen to music you’d realize that you are inherently interested in what your friends are listening to. I’d say 90% of all music I listen to today is a direct result of advice or suggestions I’d be given once upon a time by friends.

These social implications extend to commerce as well. Let’s say you are in the market to buy a new bicycle. And let’s say you read all of the consumer reviews and after compiling thousands of reviews you decide that you are going to buy the Cozmo bike. But now let’s say the night before you make a purchase  you have dinner with friends. And at dinner, you tell them you are going to buy a bike the next morning and your best friend interrupts and says, “I just bought a Rocket bike and it’s awesome. Way better than my crappy Cozmo bike.” In about one second your entire data set gets thrown out the window. Your friend just influenced your buying decision. Today however, these friends are online. And so are bicycle stores. So you can see that real-time purchasing decisions no longer happen in a vacuum as they are influenced by your social network.

This is where the world is going. Spotify and the Cozmo bike story are just two examples of how social connectivity can reshape traditional processes and establishments. We are just at the tip of the iceberg. Real businesses with real societal implications can leverage this social infrastructure in new and meaningful ways. If you are an entrepreneur, this is a very exciting time to be thinking about what the world could look like with a truly connected social ecosystem that has building blocks for you to use.

Game on.

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Celebrities Have No Privacy. We Are All Celebrities.

Ashton Kutcher 2008-09-08
Image via Wikipedia

There is a lot of debate going on in Washington DC and among the Ad Tech community around data and privacy. Technology has enabled every single one of us with the ability to communicate freely and broadly with ease and there are companies that make this possible, most notably through advertising revenue.

The loose claim being made is that our privacy is not safe and that as consumers, we are being exploited. However, I offer the following points to think about in order to add different abstraction to the conversation:

  • As a celebrity, you have the ability to communicate to the masses.
  • As a celebrity, you are subject to continual public criticism and scrutiny.
  • As a celebrity, you are subject to unwanted or unwarranted photography and videography.
  • As a celebrity, your likeness is often times used to make money (e.g. tabloids).

The current communication tools available make us all, to some degree, celebrities. We all have the ability to influence, communicate, and inform anyone and everyone. A right and privilege that has never been available to the masses. A right that has only been available to, and earned by, celebrities.

Now, almost anyone in the world can partake in celebrity-like activities for free. And the reason these tools are free is because companies are subsidizing the development and hosting costs with advertising revenue. They are paying for your right to use these powerful tools. Tools that give you unparalleled communication capabilities. A soapbox to the world (e.g. this very blog).

So when I hear about pending legislation on privacy and how companies are being “creepy,” I just think, celebrities have no privacy. We are all celebrities.

Only we are overnight celebrities thanks to the companies working hard to enable us with these powerful tools. If you don’t like it, you can send me a hand written complaint letter by horse, buggy, and courier.

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What Facebook Really Means

Profile shown on Thefacebook in 2005
Image via Wikipedia

I’ve been spending a lot of time lately thinking about Facebook and the implications it has on our daily lives, our communications, and our buying behavior. I’m starting to come around to the belief that Facebook truly is, first and foremost a data company in addition to being a portal for social news and activity. That’s really it and its nothing we don’t already know. Facebook will most certainly evolve and offer more compelling features like daily deals, FB credits, or even a mobile OS, but at the core, their foundation is simple. My friend Brad has been thinking about what this means in the context of historical companies and products, so I extended this line of thinking to see what I’d come up with and here is where I currently stand.

AOL vs. Facebook
AOL was first and foremost an ISP in addition to being a closed portal to various content and communications channels. Users were able to log in to their AOL account and then immediately access things like their AOL profile (what is now Facebook), their Instant Messaging and away messages (what is now Twitter), their news (what is now every news site out there), their mail (what is now GMail), their games (what is now Zynga), their chat rooms (what is now BBM, SMS, Meebo), etc. What started off as an ISP quickly became a portal for various components of one’s digital experience and to me, this is starkly similar to Facebook.

Facebook on the other hand started out as first and foremost a data company in addition to being a portal to various social content and news feeds. Users are able to log into their Facebook account and engage their entire social network of friends. Perhaps the biggest difference between Facebook and AOL is that Facebook lets users carry their identity with them online, while AOL did not. So today, if a user wants to read the news, or play games, or chat with their friends, they can do so under a uniform identify that is portable across many digital platforms. To me, this is nothing more than a driver’s license for the web which in time will become a credit card for the web.

With this said, I think its interesting to see what happens when you slightly modify the rules of open vs. closed. AOL was a very closed environment and it was only a matter of time before it got hacked up into new, competing companies. Facebook however, although still very much closed, is enabling others to access its rich database thus making it a platform for a greater social web – a Driver’s License. Other than that, I’m not sure what other interesting take aways we can learn from this comparison.

Microsoft vs. Facebook
Microsoft was a software company built to manage productivity and utility. At its core, it had an operating system that enabled specific apps which were all designed, in some way shape or form, to enhance one’s ability to be productive by leveraging digital connections on the internet, and within the very PC (between memory, the hard disk drive, CD rom, etc). Productivity was the key word here and it fueled 10 years of growth (e.g. MS word, excel, IE, Powerpoint, etc).

On the other hand, Facebook is a data company built to manage and facilitate social connections. At its core, it is a centralized data base that houses self-declared information (e.g. age, gender, location, interests, etc), and on top of that data base, it has apps that are designed to leverage these pieces of information (e.g. groups, walls, friend recommendations, etc). “Social Connectivity” is the key word here and i think we can agree that it will fuel the next 10 years of growth.

With this said, I think the Microsoft vs. Facebook comparison is a little better than the AOL analogy but I’m still not sure it does us justice to understand the full effects of Facebook. I don’t think we should look at Microsoft as the comparison to gauge what Facebook means, but instead, I think we should be looking at historical events that involved social movements. Things like voting, protesting, activism, wars, diplomacy, fundraising, emergencies & triage (healthcare), events, etc. I think the next wave of innovation (on the consumer side of things) will be about taking timeless human events (like buying things) and overlaying a precise data set and pure social connectivity layer (e.g. Facebeook). Because in each one of these social events, there are very different use cases, with a very different way of using and looking at the data.

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Display Advertising – State of the Union

The Planet Data Center
Image by The Planet via Flickr

Just some high level thoughts on where things are at and where things are going in digital display advertising…

We may look back and call 2010 the year of the “DSP.” It was the year when agencies recognized they could leverage ad network technology and fundamentally change the way their businesses operated. In an instant, buyers had scalable, centralized access to auction-priced display inventory. This new shift realigned agency resources, buying habits and media planning workflow because now, display media could be bought and sold instantaneously. A commodity was now being bought, traded, and sold as if it were the stock market. But now, two things are slowly happening which will bring us to the next wave of technology, or technology protocols and processes. Data Management, or now otherwise known as a DMP:

1.       Buyers are hedging their bets with DSPs, but lack a centralized data warehouse.

As the DSPs or Ad Management Platforms continue to grow, in terms of scale and technical features, the buyers are continuing to explore competitive offerings. At the end of the day, if a DSP is going to power an agency trading desk or a buyer’s business, it will become imperative that the buyer maintains options. And as this diversification happens, the buyers will lose the ability to maintain a standardized, centralized, exportable data set. A data set that can be used in any DSP, any traditional network, or any publisher and more importantly, for any medium whether it is advertising in display, text, audio, mobile or video.

2.       Publishers are realizing the need to better segment and monetize their first party data.

Publishers face perhaps the most challenging problems of anyone in this ecosystem, primarily due to the fact that the majority of VC backed businesses in the last few years have been focused on the buy-side. As a result, publishers must consider the effects of working with ad networks, data companies, trading desks, yield optimizers, ad verifiers, privacy companies and must do so with inadequate or legacy technology. Technology that was built for the traditional ad network world. The value for publishers, outside of the content and the inventory they create, is unarguably the audience data. It is for this reason publishers are now focused on securing a comprehensive data strategy. A strategy that provides intelligence and protection to monetize data through direct or indirect media sales, or through direct or indirect data sales, all the while leaving that choice up to the publisher.

We will look back and call 2011 the year of the “DMP” and perhaps the year that a new Online Advertising Operating System was formed. The year when a loosely coupled system of advertising technologies (or few tightly integrated systems) began to work together in an attempt to empower media planners with the same capabilities of that of a sophisticated ad network.  And in the middle, will sit the delivery mechanisms (DSPs) and the intelligence (DMPs) so that young media planners can deliver data driven ad campaigns for their client across all mediums and platforms from right behind their desks.

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“Premium Content” is the wrong name – will be called “Niche Content”

Image by neonihil via Flickr

This week was internet week. I listened to a lot of media companies talk about “Premium Content” but I’m not sure that this is the right vernacular anymore.

Large media companies establish businesses on the basis that they can create an entire line of “premium content.” Information that is assembled, curated, and distributed with a stamp of approval – that stamp is the company brand name. There is a lot of value to this process, but I don’t buy it, at least not in today’s world.

If I had to choose between reading content written or produced by a “big name media company” or by someone I know and trust, or someone who has a community vouching for that person’s character, credentials and opinions, and someone (or a group of people) that focus on very specific topics and are experts in those topics, I will always choose the latter. (If I could do both, that would be killer – and is a viable business opportunity in my opinion)

I was riding the NYC subway yesterday and saw a quote for a book review. It said something along the lines of:

“An ultimate matchup between….You can’t put this down, it’s one of its kind” – The some city Post

Really? Why should I care that this newspaper, a newspaper from a city I’ve never even been to before, gave the book a rave review? Who cares?

What I really care about is the person that gave the review. I want to know who that person is. I want to know what that person has done and why they are entitled to speak on behalf of some newspaper. If that person’s opinion matters so much, I should be the one to decide.

The future of “Premium Content” will be created by small groups of people and crowds. People with a passion for niche topics, and those people will intently focus on that one topic. They will become businesses unto themselves. The community will provide the seal of approval and the “big name media company” will matter less, unless their businesses change – to businesses of small, relevant, meaningful “niche content.”

Enhanced by Zemanta is the Man – Creating a New Era of Music Media Platforms

Picture from the event

I always knew there was something super advanced and different about the Black Eyed Peas. My first sign was when I saw them perform at Intel’s private launch party for their Core 2 Duo processor at the 2006 Consumer Electronics Show in Las Vegas (thanks to Marc Harrison – pictures below). It was the first time I ever experienced a collision of mainstream music, technology, celebrities, and media all in one room, at one major event.

Yesterday I read an article in the Rolling Stones by Chris Norris titled “40 Reasons To Be Excited About Music” and sure enough, coming in at No.1 was “The Black Eyed Peas – Will.I.Am and the Science of Global Pop Domination.”

The entire article is certainly worth a read for anyone that’s in to music, but the piece that really hit me was this…

“To, songs aren’t discrete works of art but multi-use applications – hit singles, ad jingles, film trailers – all serving a purpose larger than music consumption. Creatively, he draws no distinction between writing rhymes and business plans, rocking arenas and PowerPoint, producing albums and media platforms, all these falling under a cleareyed mission to unite the largest possible audience over the broadest range imaginable. It’s a mission he communicates with a combination of Pentecostal zeal and Silicon Valley jargon, suggesting a hybrid of Stevie Wonder and Steve Jobs.”

It’s the idea that media and music are really one in the same. That business and music are thought about the same way and are less complimentary but more interconnected.

Over the past year, the lines between technology, software, media, music, marketing and news has become increasingly blurry.

Here are just some examples:

  • Meredith Media, a company that used to be a traditional publishing company is now acting as a fully integrating marketing agency.
  • Global advertising holding companies like Havas, OMD, and Publicis are now looking to build their own technology units in house in an attempt to replace the need for Ad Networks and control the entire online advertising stack.
  • Software is Media, says Fred Wilson in a recent post –  “Media are the tools that are used to communicate. And software that runs on the web is part of the media landscape.”
  • NBC recently launched a new program called “Behavior Placement” which is “designed to sway viewers to adopt actions they see modeled in their favorite shows.”

And even today there’s news about how Hearst, another traditional publishing company, is looking to buy the digital advertising firm iCrossing for $375M.

As are lives continue to digitize, the companies and artists that continue to take a longer, interconnected view on culture, technology and media, will be the ones that succeed. and the BEP are definitely on “that next shit now.”

Intel – Black Eyed Peas

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Nice’n Niche

A lot of people recently asked me about internet based businesses. Things like: How to start a blog or website, what is twitter, how to use twitter, how to increase followers and traffic, how to register a domain name, what is a domain, how to create a mailing list, how to use analytics, what is a good number of followers, how to obtain affiliates, how to create partnerships, etc.

These things may all seem trivial to anyone in the tech space but to those just entering, they seem non trivial, foreign perhaps, but very attainable.

Simply put, the evolving web has made things easy. The barriers of entry to creating an online business are much lower, but creating a long-lasting business under this premise is much harder.

It seems to me like this is one thing that is severely overlooked these days. I’m all for starting new projects and businesses, but if you plan to do so, you should also recognize that you are most definitely not the only one.

One way to overcome this obstacle, and perhaps the best way (without knowing how to write code) is to start a business with a very niche focus. If you are successful, you can certainly expand your focus, but to start, you probably want to try to build a loyal following first. And to do that takes hard work.

In the beginning, try to be the very best at something very niche. That’s what I would do.

Take it from this guy (Gary Vaynerchuk). He certainly has.

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Oreos are Good, Especially The Audience Layer

Photo of an Oreo cookie on a white table.
Image via Wikipedia

Doug Weaver wrote a great piece today titled The New Oreo, Part 3: The Audience Layer.

“Anyone mildly plugged into digital advertising in 2010 can’t possibly ignore the noise and energy around audience buying.

There are many people in our industry who can go a lot deeper on this topic than I…”

I’ll attempt to take it a bit “deeper” but will do so around his 4 premises.

  1. It’s a Different Marketplace: “Audience buying is happening, and it is going to happen more”, but today, the market is not transparent. There are many companies out there that can sell your data for a price (and if not tied to media its probably much less), but what value are you getting other than a new, arguably small revenue stream? Are you learning about data strategies for your own organization? Are you learning about audience data collection, segmentation and optimization? If you’re going to invest time and effort in a new partnership, understand how the “data” company can make you smarter and affect your business in a meaningful way. One that adds long term value. Remember what ad networks did to your business?
  2. Create a Trading Desk: “Segregating and centralizing the audience selling activity inside your organization is a good idea. Keep your ‘page sellers’ focused on selling the value of placement. Let your specialists manage the relationships and requests from DSPs and interact with your optimizers.” I would take this one step the opposite direction. Publisher that can take the lead and sell audiences on top of their placement should see increased CPM rates and differentiation from their competitors. If this is where the market is heading, might as well start understanding it now.
  3. Demand See-Through Tags: If a company is tagging your site, you should not only understand who pays the freight, but you should have some visibility into the actual shipment. Simply put, you are entitled for more insights other than just a paycheck.
  4. If You’re a Data Enabler, Get Paid for It: Publishers should absolutely get paid for their data, but they should work to optimize the use of that data by looking at and leveraging the individual behaviors as well as applying that data towards multiple revenue streams. Companies that can offer revenue streams for media and data, using the same data source, can help the publisher over the long haul in establishing a meaningful, multifaceted business.

(Disclosure: The post can also be found at Lotame Learnings. Lotame is my current employer)

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