Online Subscriptions Entrepreneur of the Year 2008

MarketingSherpa Selling Online Subscriptions Summit Transcript 2008

Session Description In 2002, Allen founded 10x Marketing, an internet Every year we celebrate an entrepreneur whose marketing agency that was sold to Innuity in 2005. In inspirational story shows you can start a subscription 2004, he started FundingUniverse.com, a fast-growing offering that succeeds online without major corporate company that helps entrepreneurs through venture backing. Past winners include AskTheBuilder.com and consulting. Since 2007, he has been 100% focused on TheLadders.com. Find out who will win this year! his new company, FamilyLink.com. Allen and his wife, Christy, have 8 children. He About the Presenters graduated from BYU with a degree in Russian in 1990. He is suffering from a serious addiction to his BlackBerry, iPhone and Amazon Kindle. Paul Allen CEO, FamilyLink.com About FAMILYLINK.com FamilyLink.com is a venture-backed startup in the genealogy and family space. The company’s genealogy site, WorldVitalRecords.com, provides access to nearly Paul Allen has founded several companies in the 2 billion family records, has 30,000 paying subscribers consumer content and social space. He founded and is growing by thousands a month. The company’s Ancestry.com in 1997 and launched MyFamily.com, the Facebook application “We’re related” has had more fastest-growing community site of its time, in 1998. than 3 million installs and nearly 100,000 daily active After an initial stint as CEO, Allen focused on internet users. marketing and strategy for several years, helping Ancestry.com become one of the leading content subscription sites in the world.

A/B Testing Case Study

PRESENTATION some of you might know. His name is Paul Allen. As he MODERATOR: Our last presenter of the day is not just likes to point out, he’s not the Paul Allen that you’re going to give us sort of their presentation, their case thinking of, the co-founder of Microsoft. Instead, Paul study, but they’re also somebody we’re recognizing. is a veteran of the online subscription industry. He We’ve done this every year at the Summit. We like to founded Ancestry.com back in the ‘90s and grew that call out somebody that we call our Entrepreneur of the into the largest genealogy site on the web. Year. This is somebody from the subscription industry He eventually sold that company, but didn’t really get that is proving you can be a small company, but you out of the subscription business. He felt compelled to can be smart and nimble, and you can have some really jump back into it, for reasons I’m sure he’ll explain. What great success. he’s done is he’s jumped back in and he’s started another It’s not just the metrics. Obviously, those are important, online genealogy site called World Vital Records. the growth rates that they’re achieving, but it’s also just World Vital Records, when they came on my radar screen the lessons that they have to teach the rest of us about a while ago, several months ago, had just announced some of the tactics, and techniques, and strategies that that they’d doubled their subscriber base in a matter of are working for them, some tried and true methods, and a few months. That was right around the beginning of also some new ideas that they’re really using to help the year. They have actually now tripled their subscriber achieve their success that we want them to share with base since I first talked to Paul, and that was back in you. January. So, in less than a year, they’ve tripled their This year, our 2008 Entrepreneur of the Year is a name subscriber base, and they’ve done this through a

Online Subscriptions Entrepreneur of the Year 2008 combination of tactics that, when Paul explains them, changed dramatically in the last 11 years. It’s actually are more of the tried and true methods. But some of fun to use some of those tried and true methods, and them are really creative and really making use of some at the same time to try to be on the leading edge, and of the latest phenomena on the Internet. the cutting edge, and figure out what can we do that’s different. They are actually big believers in social networking and, as part of World Vital Records, they created their We’re now competing with the company that we helped own social networking site called Familylink.com. found that’s doing about $150 million a year in revenue. They’re also big players in Facebook. They developed a When I was there, we bought the number one or the Facebook application called We’re Related, which lets number two competitor in the space, and a year after I people put a family tree on their Facebook profile and left the company, they bought, again, the number two link to their family members. This project, which we competitor in the space. So it was really a consolidation profiled in a case study a while ago, was one ofthe in the online genealogy space, and there really hasn’t most successful Facebook apps in. I think – I forget been any competition, so to speak, in the last five the number of people who have downloaded it in the years. first six months – they’ve got more than 100,000 people So big, dominant player. You kind of wonder, when using this application every day. you’re looking at a large company like that, is there They’re learning a lot about what kind of role social an eBay kind of network lock-in model where there’s so networks like Facebook can play in the marketing efforts many users, and so much content, and so many users for your own subscription site. I think Paul is going to generating new content, that it’s invincible, and that talk to us a little bit about some of these things and there’s no way that you can take on a company that is some other factors that are driving his success. that size? Can you be nimble, can you be creative, can you take some totally new approaches, and as Clayton Let’s bring him up. But first, let’s recognize Paul Allen Christiansen from Innovator’s Dilemma might say, “Can as our Entrepreneur of the Year. I have a small but you go after an audience that the leader is not going impressive ceremony here. after at this point?” Paul Allen: Thank you. Thank you so much. Appreciate Most of you probably don’t do genealogy, I’m guessing. it. Wow. I can’t tell you how much this means to me. Most genealogy societies and conferences that you I’ve been a huge fan of MarketingSherpa for years attend, I would say the majority of people are over 60 because, as one of the early pioneers in the Internet years old. They have time on their hands. They’re at that subscription business model, we launched Ancestry.com point in life where family, and their heritage, and their back in April of ’97, and this was just after USA Today legacy matters more than anything else. It’s not like had discontinued its attempt to sell subscriptions. There a lot of young professionals have any time or interest were very few people doing subscription marketing back in doing genealogy. But there’s a life stage where you then, so it was a pretty lonely gig to just try to figure get to the point – my Mom, for example. I’m thinking it out on your own. about her a little bit because of Mother’s Day yesterday, Later, a few years later, as MarketingSherpa started not but she’s got eight children and over 30 grandchildren only holding this Summit, but also publishing great – 34 I believe. Every morning, she wakes up and checks case studies, I have said a hundred times that, pound the MyFamily.com website to see if any of her children for pound, MarketingSherpa case studies are the most or grandchildren have posted anything or added any valuable thing that Internet marketers can ever read. photos to the site. That night before she goes to bed, I’ve been to several Summits. I’ve sent a lot of people to she does the same thing. She just lives for her family. Summits. I love the transcripts. I love the case studies. I think at that age, when you’re over 55 or 60, and life So, for me to be honored by MarketingSherpa is truly a has kind of – the hard, intense part of life, maybe – has great honor for me and for my team. passed a bit, and you kind of are thinking about what’s The fun part for me about what we’re doing now, 12 really important, that’s the audience that Ancestry.com years after launching Ancestry.com, and 11 years after has been serving for about 12 years. Of course, that’s launching Ancestry.com’s subscription business model, our audience, too, at World Vital Records. is that we’ve got quite a few of the original people I’ll jump into the slides now, and kind of tell you our back together again. Of course, the Internet world has story. As I said, several of the original people, including

Online Subscriptions Entrepreneur of the Year 2008

the two main original engineers, got together with me hit 31,000 this week. Pretty happy about the steady in the middle of 2006 and we started WorldVitalRecords. growth. Those people over 60 years old who tend to do com. We’re now up to about 32 employees, with a third genealogy, and about 60% of them are women, they’re of them international. We did raise some seed funding constantly looking for the new database that might last August of about $1.2 million. contain that ancestor that they’ve been looking for for 10 years or 20 years. So, we think there’s room for more We have the genealogy subscription business, which than one content company in the genealogy space. is the vast majority of our revenue. We also are doing the social network, as has been explained. Our social We could talk about how the majority of our subscribers network strategy is really starting to take off in one have come from our affiliate program. In 1998, while way, and that is in traffic. We have about 500,000 at Ancestry, I read an article about Amazon’s associate monthly visitors to our genealogy subscription website, program and decided, “Hey, we should try that. We and we’re obviously doing everything we can to add should set up an associate or what they started calling more content to that site and interest more people in an affiliate program.” becoming subscribers. I went to New York City for the first-ever affiliate But, our social network app on Facebook, which is Summit where the CEOs of BeFree, LinkShare, and soon to be launched on several other social networks, Commission Junction were all kind of telling their story. BiBo, MySpace, Hi5, Google Orkut – we love the We chose BeFree back then, and for the next few years trend for social networks to open up to third-party the affiliate program became the number one source of application developers. I was actually really lucky to be new customers for Ancestry. in San Francisco about a year ago today … when Mark We had over 30,000 affiliates, and during many Zuckerberg, the CEO of Facebook, announced Facebook months they accounted for 30 to 35% of our total platform. new customers. Of course, when we started World Vital As a veteran of the Internet, I actually got on the Records, we wanted to launch an aggressive affiliate phone immediately with my team and said, “This is the program, so we’ve been paying out a 40% commission biggest Internet marketing opportunity in ten years. to our affiliates. We’re toying with increasing that, just This is huge.” We changed our strategy from building because affiliate loyalty matters a great deal. That’s our a destination website for families to instead putting biggest channel. an application out on Facebook and hoping to reach Also, 17% of our sales were coming from online millions of families through the momentum that they marketing, and that’s really pay per click and SEO. Then already had developed. They were adding 250,000 we’ve actually got about 10% of our sales coming from new users a day, every one of their new users actually our inbound/outbound phone call center. A lot of people belongs to a family, or when they get married kind of in the genealogy community actually like to talk to a two families, and so we decided to piggyback on the human being. They actually still like to write checks and social networks. We’re really happy that we took that send them in. Kind of an interesting audience. approach. So, our revenue’s been growing nicely. Since January, So, if you look at our monthly unique visitors on we launched our World Collection, where we’re not just Quantcast, where we’re a quantified publisher, you’ll talking about U.S. genealogy data, but we have about notice that in the last few weeks our numbers have a billion records from around the world. We’ve signed skyrocketed. This is just because we put a pixel, finally, content partnership deals with over 30 companies and on our Facebook app. The traffic really would be sloped archive societies around the world. like this if we had had the tracking pixel up all the time. But we finally did put the tracking pixel up, so you can Our flagship product is about a billion records that see that our monthly uniques is now approaching two you can access. We’re adding hundreds of millions of million. We think when the pixel’s really been up there records this year to that subscription. Every day, we for a full month, we’ll be about 2.5 million uniques add new data and the value proposition gets better. a month to our various properties and page views, of We have users from 220 countries, subscribers from 58 course, corresponding to that. countries. Our paid subscriber growth: We started selling in October Now I want to talk about what we’re really hoping of 2006, and we’re now over 30,000. We’re going to works. It’s a little bit too early. I think there’s certainly

Online Subscriptions Entrepreneur of the Year 2008 some things about social networking that are proven to One of the interesting things we discovered as we work. You can get a lot of people to download an app. watched our app grow into the millions of users was The big question – in fact, USA Today, the big headline that, according to our analytics, over 50% of our users article in the Money Section today, was, “How are all of the app were from Canada. That kind of just shocked the Social Networks Going to Make Money?” Advertising us. We were really stunned when we first discovered that is one way, but will there be other ways to generate out of our first two million users, more than 50% were revenue, and if it’s advertising, who’s going to get the from Canada. Seventeen of the top 20 cities where we bulk of that? We’re actually kind of experimenting right had our We’re Related app users were Canadian cities. now, and this is a really serious effort for us. We started kind of looking into that a little bit and We’ve cracked the nut on getting installs of our app. discovered that there are more people over the age of Because families happen to be viral – if you sign up for …50 in Canada using Facebook than there are people a family app and you want to get your cousins, or your over 50 in the United States using Facebook. … brothers and sisters to also connect with you and build Facebook started out at Harvard, and then Ivy League, your family tree together, you’re going to forward the and then all of the colleges in the U.S…. invitation to a bunch of family members. Well, in Canada, it didn’t start out with the college So we spent $15,000 in October to advertise our app bias. When it opened up in Canada, it turns out people initially. We started getting new installs for about 23 of all ages started using it. So you’ve actually got a cents per install, and then those people would invite bigger potential audience for us, for our core genealogy some family members to join. We were getting new business, in Canada who are using Facebook today than installs for about 7 to 10 cents per user. Our funding as you do have in the United States, even though we have a company has been pretty minimal, and so we haven’t 9 to 10 times the population here that they have in gone out and – you know, I’d love to go spend a million Canada. dollars and get another 10 million Facebook users, and We are happy that people are using our app, and these we’re actually talking about doing that very thing right numbers have changed in the last few days. It’s actually now. now over 56% of our visitors have come to the app at Over time, with the We’re Related application, we’ve least nine times, and over 37% of our visitors have been now gotten to 3.5 million users. We are getting over using this app over 26 times. So we do have a strong 30,000 downloads a day. This is all viral, so there’s been loyalty. no money spent since October. Now the question is: This is just the design of the app. It’s got a whiteboard, What’s the value of this to our company? or a message board for sending your relatives messages. There are some Facebook app companies that have We have a family tree where you can build your tree and been sold for millions of dollars, or that have raised start typing in the names of all of your ancestors. Then money with a $10 million or higher valuation. There we actually allow you to invite people that you know are a couple of very amazing success stories, I think: are your relatives to join the site, but also we have a Slide and RockYou, with huge valuations and raising possible relatives tab right here where we actually are lots of venture capital because they collectively have a starting to use some algorithms to calculate who you portfolio of apps that really get hundreds of millions of might be related to that you don’t know yet. page views a day and have a lot of users. That could be your cousin might have a daughter or a Our daily active user number is important. It started son that you maybe haven’t stayed in touch with. So it out fairly small, and now it’s over 100,000 people a might be a known relative. But as more and more people day that are using our app. The question is: Could we upload family trees, so that we end up with a back end put our World Vital Records’ billion records somehow database of millions and millions of people in family in front of those 100,000 people a day, knowing that trees, we can start going back in time and saying, “Well, the demographic of Facebook is definitely not the your third great-grandfather had all these descendants, demographic of our core genealogy researcher? So, can and here’s 10 of them that you don’t know about.” you take the data that’s of great interest to people over One of the things we love about the app is that the first 50 or 60 years old and somehow embed that in a way thing anyone ever does when they discover someone that might get the interest of a lot of other people of that they’re related to that they didn’t know they were different ages?

Online Subscriptions Entrepreneur of the Year 2008

related to is they say, “We’re related. Hey, we’re related.” regular weekly newsletter. The name of the app really describes the feeling that Second, we’ve created a research tab which says, “Hey, you get, and the words that you say, and we’ve proven do you want to find out who some of your ancestors are? that our email open rates when someone sends out a Click this research tab and start doing some searches.” message saying, “Hey, we’re related,” is incredibly high. Then we added a surname search function on every We’re very happy with the name that we’ve chosen. page of our site – or of the app. Then we decided that The case study that we started less than two weeks ago, Facebook-app users are not used to paying for much. and really started getting data less than 10 days ago It’s been a free site forever, and they might occasionally for this event, was to try to generate qualified leads for buy a digital good or something like that, but there’s World Vital Records, and possibly conversions from our really – it’s not really a habit for them to – they’re not huge Facebook audience, which we think by the end of shopping, they’re socializing. the year, we’ll have over 10 million people on Facebook We’re encouraged. We actually hope that Facebook, alone using our app. And when we roll out to all the we’ve heard one of their executives talk about maybe other networks, we actually think the sky’s the limit storing credit cards of Facebook users and enabling kind on how many people – we think in maybe four or five of like an Amazon one-click type function so that if years, we could have a hundred million people around you had a Facebook apps with lots of users, you could the world using our social network app. actually offer them a product or service and they could We did a quick survey to find out. I think we got a click once and buy it. Imagine what that could do for couple thousand people that responded and we said, the Facebook app developers who have all these users, “How interested are you in researching your family but you have to, it’s hard to get a credit card out of history?” 45% were very or extremely interested. We a Facebook user. We’re encouraged by some of the were surprised by that number. 32% said they were things that are possible. We hope that that actually somewhat interested. materializes. Then we asked, “How many years have you been doing We decided, though, to try a 99-cent offer. A lot of these family history?” And 27% said 10 years or more. Now, same Facebook users might be iTunes users. They might probably most of those are the Canadians that are older be used to paying 99 cents. We just quickly decided and have a lot of interest in this. 28% said, “What is let’s give them a one-month subscription to our billion family history?” That was kind of telling. You’ve got records for 99 cents, just to see what happens. Typically, a lot of young people using Facebook that don’t even we charge $15 a month for access to the billion records. know what family history is. That’s our audience that I’ll show you kind of what we’ve learned so far. There are we’re trying to start converting over. some encouraging things; then there’s some too soon to call on the rest of it. The tactics that we decided to use were, No. 1, to encourage people to sign up for our newsletter. When Actually, I’m a little embarrassed. A couple of the data you launch an app in Facebook, you don’t know anything points in here are not correct. I just got back from 10 – you really know very little about who the user is. You days in Europe and haven’t had a chance to weigh in can’t send email messages to them. You don’t have their on these slides, and so I’ll make a couple of corrections email address. There’s a very limited amount of things and then, hopefully, we’ll get an updated PowerPoint that your app can send to their Facebook inbox. There’s to anyone that wants one. The most encouraging thing really – you don’t know – you can’t store their name for so far is that we started asking people for their email more than 24 hours. Facebook has some really great address, and we worded it as research tips. “Sign up for features, and then they’ve got some limitations on how our weekly newsletter so that we can help you find your much data that you can get about these customers ancestors.” We’ve had a 3.98% conversion on collecting unless they explicitly give the data to you. those email addresses. We’re getting over 2,000 sign- ups a day, so about 50,000 people a day see that, Part of the challenge is how do you get these 100,000 and about 2,000 a day sign up. We haven’t really fully people to tell us who they are, and to give us their turned it on yet. This pop-up – this Ajax pop-up doesn’t email address, and to opt in to something. We wanted – we’re not maximizing our potential usage of it, but to get them to opt in to our weekly newsletter. We’re we’re pretty encouraged that 4% would give us their actually going to create a customized newsletter for email address. this audience, but initially we’ll sign them up to our

Online Subscriptions Entrepreneur of the Year 2008

The research tab, right here, if they click on it, we can do One of our goals is to get you on the phone with a quick lookup on the Facebook API and find out what somebody who can actually do some searches for you this user’s last name is. They don’t have to type in their and help you discover it’s not that hard, and it’s actually last name, but we grab their last name from Facebook, kind of addicting, once you start realizing you really do in this case Nearing, and we do a search across some have some ancestors who have some pretty remarkable of our most popular databases, like the Social Security stories, at whatever age. Death Index, Find-A-Grave, which is a collection of This is where there’s some encouraging news, and about 20 million tombstones, including millions of then I’ll make the embarrassing correction that I was photos of tombstones, or headstones, so that you might mentioning earlier. We do project having over 10.2 actually find your grandfather, or great-grandfather, or million users in Facebook alone by the end of this year. some other relative in one of these databases. That’s without any advertising. If we raise another One of our most popular free databases on our site is round of funding and put in maybe a million dollars, we the Ellis Island database of 24 million people that came could actually purchase another 10 million users with in. You can look across the bay and see the Statue of about a million dollars. Liberty and Ellis Island, and you can find if you have At 2,700 emails a day that we’re collecting, we would any ancestors that crossed through Ellis Island in their end up with 645,000 email addresses by the end of this course of coming to America from about 1894 to 1924, I year. So we’re pretty encouraged by that. Now, the 4.15% think. About 24 million, so there’s a pretty good chance conversion to trial is not correct. It turns out that when that most people that are doing these searches are people clicked on the sign-up button, only 4.15% of going to find something that is one of their ancestors. those people who clicked actually signed up. So a pretty If they click on one of these results pages, then it low conversion rate. Of the people who viewed this 30- takes them to a sign-up page. Now on every page of day special offer, only .26% of them actually signed up the appearance you can now type in any surname. It all the way. The real conversion rate here is .26%. doesn’t just have to be your last name. It could be The 4.15% is of people who clicked who ended up your mother’s maiden name, or any other family name giving us their credit card or signing up through Pay that’s in your family tree, and you can do a search. We Pal. We actually had a slightly higher conversion rate haven’t enabled first name, last name searching yet, through Pay Pal. It was about 4.7% through Pay Pal, so this is a very crude first attempt to just say, “Hey, 3.8% with just a typical credit card. We’re actually how many people of your surname show up on World thinking of getting pretty aggressive and even doing Vital Records?” There’s a lot more optimization that can some Bill Me Later offers, or just whatever we can to come, but we’re just, like I said, getting started with get the crossover going, the stream of people flooding this. over from Facebook into our World Vital Records sign-up Here’s the deny page we’ve been testing. Like I said, 99 funnel. cents. We do say it’s a Facebook exclusive offer. We also The good news is those email addresses that we’re tell you that you get 30 days of unlimited access, over collecting, we have sent out one welcome email to say, a billion names, plus a 10-minute consultation with a “Thank you for signing up. Here’s some more information. WorldVitalRecords.com expert to kick off your research. By the way, here’s the 99-cent trial.” We ended up with We have a large – growing, small but growing – call a .8% conversion rate on our first batch of emails. center. It’s going to be large. At one point, Ancestry Now, we have their email address and so we can market had several hundred call-center employees that were to them every week until they either unsubscribe or very well trained on how to sell genealogy. And as they subscribe to the paid service. So, we now have the company started trying to increase profits, I think two real numbers: .26% conversion rate on the deny they laid off every one of their inbound and outbound page, .8% conversion rate on the first welcome email, sales people. We’re about five minutes away in our and by the way, it’s not a very personalized email. Last headquarters in Provo, Utah, from where they were, so year, we found that we got a 1,300% increase in sell- we’re now recruiting as many of those very certified, through when we personalized the email and actually trained sales people who understand the sales process. did a bunch of searches in our databases based on your We’re having tremendous success with our inbound and surname, and then gave you the search results in the our outbound call center. email itself.

Online Subscriptions Entrepreneur of the Year 2008

We really personalized it and said, “Hey, you know, to take a few questions. Mr. Allen, here’s all the Allens that are found in our Participant: To what do you attribute the success of databases. You should sign up and see if any of them your affiliate program? are related to you.” The .8% is encouraging. If we can continue to do those emails and have a decent response Paul Allen: Part of it is that there’s a number of very like that each week, then it’s possible that we could get successful affiliates in the genealogy industry and they up to the 4% conversion rate that this slide wishes that all know each other. Having recruited many of them, it could forecast. and having worked with many of them 10 years ago, it wasn’t hard to just kind of go back and restart a At 4%, that would be 26,000 one dollar subscribers. By relationship with them. I think it was familiarity with the way, it’s kind of not really a subscription offer if it’s who the top affiliates are. only a one-month trial for a dollar with no renewal. If you’ll notice down here, we say, “This exclusive offer Secondly, it’s the 40% plus other incentives. It’s just will not automatically renew your membership.” There’s treating them the way that affiliates deserve to be going to be another attempt to convert people from the treated, and not – sometimes affiliates get squeezed as one dollar/one month to the $15 a month, or the $5 a management tries to increase profits. It’s like that’s the month for the U.S. collection. easiest channel to cut commissions on. Our philosophy is that that’s the most important channel to not cut We think if we can get people on the phone, our phone commissions on. You’ve got to just take care of them. team has about a 15% conversion rate when they’re You’ve got to motivate them. Those are the two main actually on the phone with somebody, either inbound or reasons why it’s been so successful for us. outbound. We’re pretty optimistic. As I say, that 4.15% conversion is not a done deal yet. Our average order Participant: I had a question on the affiliates as well. value on World Vital Records right now is $35. It’s going You said you pay 40% out. Is that a one time, or is that up because our world collection is $120 a year. recurring? Our hope is – and I wish I could give this presentation Paul Allen: That is 40% one time. a few months from now. Maybe next year at the Summit we could give you the actual data on this crossover Participant: I was wondering how you integrate with strategy because I think this is pretty big news, if it Facebook and how you get an application with them? works. I think this is pretty important that subscription Paul Allen: How you get an application on Facebook? marketers could say, “Hey, we can use social networks There’s Facebook.com/developers. You go to that and and the hundreds of millions of people that are actively then it walks you through how to build an application. using social networks.” There are actually over 26 social You can hire developers to build it for you that already networks in the world that have over 10 million users. know how to do it. There’s about 30,000 apps in Facebook These social networks have the highest engagement already. A lot of the developers who started developing numbers I’ve ever seen. You’ve got people logging in Facebook apps early on are now building MySpace apps, multiple times a day, getting hundreds of page views BiBo apps, Hi5 apps, Google Orkut apps. a week. There’s that big question: Could subscription There’s this open-social technology, or framework, marketers attract enough of those people with some kind where a lot of the other social networks are saying, “We of an offer so that they could start paying for content? will allow you to build apps.” And kind of the same app And, as I said, we’re testing that 99-cent offer thinking can play across multiple social networks. that’s an interesting initial price point, but what I’m really hopeful is that Facebook will make it easy, as I Facebook has made it really hard to get a new app to said, to do the one-click purchase. Then you can have become viral. In the first few weeks, the first few apps a pay-per-view offering, as well as the subscription that were out had unlimited invite opportunities so model, as well as what we’re doing now to monetize our that if you’ve got a Facebook user with 800 friends, and Facebook app as advertising revenue. We actually have you would be able to have them email all 800 friends a pretty decent percentage of our total revenue is now on day one, and say, “Hey, I just joined - I just got this coming from advertising, although subscription is still app. Do you want to try it out too?” the majority of it. So over time, Facebook has had to really ratchet down the That’s the case study as far as it exists today. I’m happy viral touchpoints. Today it’s much, much more difficult.

Online Subscriptions Entrepreneur of the Year 2008

There was a really nice window of opportunity early on. time, and effort that goes into it? We kind of got in in October before the window was Paul Allen: I totally do because you’ve got 10 million really tightened. Today, it’s much more difficult. But I people. I mean if there weren’t 10 million people at think there are social networks where the virality is just the beginning of that funnel, then .26 would be pretty coming on stronger and stronger. I think developers are horrible. We’re not paying; we’re not advertising. We’re all trying to decide what network to go after next and not spending a ton of money on advertising to get that how to monetize it is the big question. .26% conversion, so because the viral growth is so huge, Participant: How do you kind of like advertise your and that can be that way for many social networking application? apps. Paul Allen: There are five or six advertising networks on There are hundreds of applications that got millions of Facebook and then you can, of course, buy advertising users, and so because of that viral growth, yes, I do on Facebook directly. I think it’s like a minimum think it’s a very smart thing to try to not only get the of $50,000. But there’s these small social network .26%, but also the .8% with the email follow up. That advertising networks, and they’ll let you buy little text was just the first email follow up. Then over time, how links, or little banners. It’s just like – it’s similar to much can we optimize that .26 and the .8 and maybe Google AdWords. end up with several percentage points of conversion?. I think we’re just two weeks into it. I do think it’s The fun thing with Facebook, though, is they have this extremely promising. Facebook.com/ads where you can go in and see all the demographics. You could actually target ads to women Participant: Would you say if you’re objective of using between age 30 and 40 who majored in music in college, widgets or applications, Facebook applications – if your and who now live in the Pacific Northwest. The targeting objective was to generate awareness about your site possibilities with social networks are phenomenal. or your brand, it would be more effective to use an application than just have an objective of sign-ups? I think MySpace has their hyper-targeting in beta right now with a few hundred advertisers. Imagine Paul Allen: That’s a good question. I really don’t know. how much profile data there is out there, and imagine For us, it just makes sense to try to do as much lead how incredibly targeted it can really be. It’s the most generation as possible. I’m not sure I really have a good targeted thing I’ve ever seen. Once you have an app, answer for that. you actually can interest the right people in that app Participant: I’m curious to know that - you mentioned through that targeted advertising. that the average, I guess maybe American, who Participant: You mentioned that Facebook could be does genealogy tends to be 60s, a little older. That your No. 2 sales channel. certainly isn’t the general Facebook demographic. Was your intent initially to expand that demographic to a Paul Allen: Oh, the No. 2 – it could be the number two younger audience? Is that why you pursued Facebook? channel in revenue? The second part of my question is, those who are Participant: Yeah, but if you didn’t have your subscribing to your service from Facebook, are they Facebook social platform FamilyLink and only had your tending to skew younger than people who subscribe subscription business, how do you think the Facebook from other channels? application would have helped increase your sign- Paul Allen: Two really good questions. To answer the ups and conversions? Right now you’re getting .26% first question, we would really love to dramatically conversions. increase the interest in family history way beyond Paul Allen: For our subscription marketing. Yeah. that older demographic. That’s a big interest of mine personally, and of our company. We think the two Participant: For your subscription business. That’s main ways to do that, No. 1, is through the social right. What if you didn’t have your social platform, your networks where you’ve got instant access to million of FamilyLink.com and you were trying to use Facebook people across families. The interest in family history application as your sales channel for your subscription can be contagious among family members. One person business. Do you think you would be able to achieve the discovers a headstone of a great grandparent, the next same number of conversions and the same number of thing you know, 30 other relatives are looking at it sign-ups? Would it be worth it given all the costs, and

Online Subscriptions Entrepreneur of the Year 2008

with real genuine, emotional interest. So the younger renewing automatically? That just struck me as kind of people aren’t interested in doing the research, but most strange from two perspectives, which are: Why not do of them, from our experience, are very happy to read it since you’re already capturing their details and it’s the letter, or between a grandfather and a grandmother probably not that much more difficult. Secondly, why during the war. have that in the small print if it’s good news not bad news? Yes, we do think – that’s one reason we went after the Facebook audience. Secondly, we went after the Paul Allen: Those are two excellent questions. I’ll Facebook audience because our business is about email my team right after this meeting and say, “Why connecting living relatives to each other much more aren’t we doing the auto renewal?” I don’t want to so in the long run than it is about connecting you to shock anyone, and those earlier presentations of the your deceased ancestors. Just like Ancestry.com and monthly trial, and they’re really getting billed for an MyFamily.com, we had the genealogy business and we annual subscription. had the family business. We’re doing the same strategy, At Ancestry, as I left the company back in 2002, there but we’re using the social networks to reach millions of were a lot of problems with the auto-renewals, especially users. with the older people who didn’t understand what the Everybody is interested in their living relatives, even auto- renewal was. There was some legal action taken, though only a small percentage are actively interested and some bitter taste in people’s mouths. The call center in researching their deceased ancestors, about 7%. had AOL-like practices, which was, “We’re never going to let you unsubscribe. No matter what you say, we’re The second question, remind me. Oh, are they skewing going to find a way to get you to continue. We’ll give younger already? That’s a great question. We haven’t you four months for free. We’ll do whatever it takes to even done the demographic research on the first batch keep you on so that we can continue to bill your credit of subscribers from Facebook. So, I honestly don’t know cards …” the answer, but it’s a great question. Anyway, so we are not trying to be that aggressive. We Participant: So are you related to the other Paul saw that that alienated a lot of people in the genealogy Allen? industry, so we’re kind of bending over backwards to be Paul Allen: At COMDEX, like 12 years ago, somebody friendly and maybe there’s a balance there that we can asked me that, and I said, “Yeah, he’s my dad,” and they strike that would actually be better for us financially. So said, “Well, I didn’t think he was married,” and I said, I think we’ll work on some different ideas there. “Yeah, that’s why no one knows about me.” I haven’t Sean Donahue: All right, well I guess that’s it. Let’s used that line since because I was – that was a kind of give him a round of applause. stupid thing to say. I’ve hoped to meet him someday. I’m No. 5 on Google, he’s number one, two, three, and four. I get a ton of email from him – for him, I mean. I’m a blogger at PaulAllen.net, and every week I get emails asking for large donations to philanthropic causes. Some are really sad and some actually know him personally and think that I’m him, so like a death of his mother’s friend. They email me and I’m like, “What am I supposed to do?” I have a friend who knows Paul Allen, and I think three times now I’ve actually forwarded what seemed to be pretty legitimate family things to him. I think there’s a subscription model there. I should be his paid screener. I’m working on that one. Participant: My question is why are you – why’d you have that small print that has the one dollar trial not

Online Subscriptions Entrepreneur of the Year 2008

Reaching New Market Segments

Paul B. Allen, Founder & CEO FamilyLink.com Inc. Monday, May 12, 2008

More data on this topic available from::

Company Background

 Founded 2006 – included several from Ancestry.com’s original team  32 FTEs – (1/3 international)  Seed Funding – $1.2 million 8/2007  What We Do: . Genealogy Subscription Business – WorldVitalRecords.com . Social Networking Applications – More data on this topic available from:: We’re Related (Facebook App) . Social Networking Platform – WereRelated.com (coming soon)

Online Subscriptions Entrepreneur of the Year 2008

Traffic Trends – Unique Visitors

More data on this topic available from::

Traffic Trends – Page Views

More data on this topic available from::

Online Subscriptions Entrepreneur of the Year 2008

Subscriber Growth October 4, 2006 1 May 7, 2008 30,725

More data on this topic available from::

Sales by Channel 3% 17%

23%

More data on this topic 8% available from::

39% Online Inbound Affiliate Outbound Partners Advertising App Dev

Online Subscriptions Entrepreneur of the Year 2008

Revenue Growth

More data on this topic available from::

Worldwide Reach

 Users from 220 Countries/Territories  Subscribers from 58 Countries

More data on this topic available from::

Online Subscriptions Entrepreneur of the Year 2008

“We’re Related” Overview

 Facebook Application  Launched October 2007  3.5 million users  105,000 daily actives

More data on this topic available from::

Growth of Application Download

Total Downloads: 3,505,249

More data on this topic available from::

Oct Dec Feb Apr

Online Subscriptions Entrepreneur of the Year 2008

Traffic Growth

Daily Active Users

120,000

100,000

80,000

60,000

40,000

20,000

More data on this topic 0 Date Range – February 11 – May 6 available from:: Averages (All Time): Averages (Last 30 days): • 47,688 Daily Visits • 87,192 Daily Visits • 43,522 Daily Unique Visits • 77,849 Daily Unique Visits

Visitor Loyalty

 Over 50% of visitors have been to site at least 9 times  30% of visitors have been to site over 26 times

More data on this topic available from::

Online Subscriptions Entrepreneur of the Year 2008

More data on this topic available from::

Online Subscriptions Entrepreneur of the Year 2008

More data on this topic available from::

Case Study - Goal

 Generate qualified leads for WorldVitalRecords.com and possible conversion to new subscribers from Facebook audience of 3.5 million people (growing by 30k per day)

More data on this topic available from::

Online Subscriptions Entrepreneur of the Year 2008

Case Study – Survey Results  How interested are you in researching your family history? . 45% - Very or Extremely interested (24% + 21% respectively) . 32% - Somewhat interested (My curiosity has been piqued)  How many years of family history research experience do you have? . 27% - 10 years or more More data on this topic available from:: . 25% - Less than 1 year . 28% - What is Family History? . 19% - Between 1 to 10 years

Case Study – Tactical Approach

 Newsletter . Encourage users to sign up for WorldVitalRecords weekly newsletter  Research Tab . Create an icon that allows users to search their ancestors on WorldVitalRecords.com  Surname Search Function . Place a surname search box on every screen

More data on this topic available from::  Special 30-day Offer . 99 cents for one-month access to the entire WorldVitalRecords.com collection

Online Subscriptions Entrepreneur of the Year 2008

Tactic – Newsletter Sign Up

 Results since campaign launch . 3.98% conversion . 2,682 sign ups in a single day

More data on this topic available from::

Tactic – Research Tab

More data on this topic available from::

Online Subscriptions Entrepreneur of the Year 2008

Tactic – Surname Search Function

 Surname Search on every page

 Surname Search results

More data on this topic available from::

Tactic – Special 30-day Offer

 99 cents offer for entire WVR collection

More data on this topic available from::

Campaign is converting at 4.15%

Online Subscriptions Entrepreneur of the Year 2008

Test Results – Leads & Sales

 At just 27,500 new installs per day . Projecting over 10.2 million users by year end  At just 2.700 emails per day . Projecting 645,300 at year end (1mm in reach)  At just 4.15% conversion to trial . 26,780 subscribers or more than 50,000 based on preliminary metrics  Average Order Value on WVR ~ $35 More data on this topic available from:: . Could yield $1.75mm  After Affiliate Marketing, Facebook could grow to our #2 Sales Channel, reaching new demographic groups 23

Credits/Thank You

Paul Allen Founder & CEO FamilyLink.com, Inc. (801) 376-2738

Thanks to the entire team at FamilyLink.com for everything they do More data on this topic available from:: each day for our customers and partners worldwide!

Landing Page Optimization Methodology: An Exclusive Preview

About the Presenter About MarketingExperiments Dr. Flint McGlaughlin MarketingExperiments is a research laboratory dedicated Director, to discovering “what really works” in marketing. The MECLABS MarketingExperiments Lab tests every conceivable methodology to determine which online strategies and tactics are the most successful at improving Flint McGlaughlin is the Director of MECLABS. The conversion, driving traffic, and selling product. organization has partnered with key market leaders MarketingExperiments also conducts real-time marketing including, The New York Times, Microsoft Corporation, experiments with research partners such as The New York and Reuters Group. Flint also serves as the Director Times, Reuters Group, and Car & Driver. Scientists at of Enterprise Research at the Transforming Business MarketingExperiments have developed patent-pending Institute, University of Cambridge (UK), as the Chairman methodologies which allow its partners to achieve of the Board of Governors for St. Stephen’s University, significant conversion gains in their marketing efforts. and as a Trustee for Westminster Theological Centre. Dr. The findings from these experiments are regularly McGlaughlin originally studied Philosophy and Theology published in the MarketingExperiments Journal and at the University of London’s Specialist Jesuit College. broadcast via online briefings. MarketingExperiments, Today, his primary research is focused on enterprise as based in Jacksonville Beach, Florida, is associated with transformative agent. His work has won multiple awards MECLABS Group, which also includes MarketingSherpa and has been quoted in more than 13,000 online and and InTouch. offline sources.

PRESENTATION computer. The big part is that it’s all books nationwide Dr. Flint McLaughlin: We’re going to get started this instead of just one area edition. morning … I will be hammering websites, but also trying Dr. Flint McLaughlin: OK. So it’s all books nationwide. to teach, in the process, some of the key principles and Now, let’s go back and tell us the channel that they drill down a little bit deeper on something we talked come from. You’ll probably need to type in the URL about yesterday when we discussed the concept of here. Where do they come from? clarity trumps persuasion. Does everyone recall that? We’re going to be applying that principle. We’ll break PARTICIPANT: They come from Entertainment.com, it through the two questions we talked about: What is which is our book site. So there’s a lot of affiliate traffic, your offer and why should I participate. And then we’re as well as paid search traffic coming to this page. going to break that down just a bit further. Dr. Flint McLaughlin: Now, it’s very important to I think we’re going to look at one website and then understand what has to happen next. Before we can I’m going to teach you a little bit and then we’re going determine what’s right on the page we just looked at, to drill down on more websites. So let’s start with the we have to kind of insert ourselves into the sequence one that we have up in front of us right now, Prefer of thoughts that are taking place prior to arriving at All Your Coupons Online. Who in the crowd – I think the page we just saw. If we don’t get that insertion it was Kristi. Where is she at? All right. Can we get a into that thought process, we’re trying to discern in microphone over to Kristi? Tell us a little bit about the a vacuum because there is forward motion in the way site. First of all, the value proposition. What exactly is someone is assessing. And the forward motion begins your offer? with something particular on this site and, apparently, there’s a link they click on, right? PARTICIPANT: Our value proposition is that you can basically print all of your coupons online. And the PARTICIPANT: Yes. reason why we say that is because it’s marketed directly Dr. Flint McLaughlin: So when we click on this link, against our book, which are the same coupons in a book what is it that we’re actually asking our self as we look form versus the same coupons you can print from your at the link? I don’t mean the customer. What should you

Landing Page Optimization Methodology: An Exclusive Preview

be asking as the optimization expert about the link that you’re not the only one, Kristi. So let’s go right here and they click on? First of all, where is the link? then look at the – when we click on this page. So we are going to go backwards. Tony, take us back again. All PARTICIPANT: The link used to be on this page and was right. So I arrive at this page. How do I arrive at this moved back a step because we’re two different teams page? and they’re afraid that we’re taking their business. So now there’s a little bit of a disconnect in where we are PARTICIPANT: This page is affiliate traffic or search located. It’s very hard to find, which was on purpose. So traffic, but most people that are coming are already if you click on – type in a zip code and hit preview. familiar with the Entertainment Book. Dr. Flint McLaughlin: All right. Type a zip code Dr. Flint McLaughlin: What is the search term that in. This page needs work itself. It’s in bad shape. All I’m using to get there? Do you know? right. PARTICIPANT: I’m not positive. Coupons is one. PARTICIPANT: So, then they come to this page, which Entertainment Book is one. is a huge disconnect from the first page. This is still the Dr. Flint McLaughlin: One of the most important other team, which they’re working on, but on the very things you want to find out are the search terms, but top it says “Buy an online membership.” let’s say coupons. If coupons were in their mind, what Dr. Flint McLaughlin: Again, is this the line they else? read? PARTICIPANT: Entertainment Book, itself. PARTICIPANT: For the online membership, it’s right at Dr. Flint McLaughlin: All right. So the first thing the very top. that you need to understand when you look early in Dr. Flint McLaughlin: All right. And then what link the channel is what are the expectations of the person? do we want them to click on? What is on their mind when they are moving forward in the process? Something in the page is triggering a PARTICIPANT: That one. response that allows them to click, and you’ve got to Dr. Flint McLaughlin: This one. think about what they’re thinking about. PARTICIPANT: That’s what our team wants them to click So they’ve come to this page maybe searching for on, not what the other team wants them to click on. coupons. It’s wasted all the print space and put a graphic on there that’s not necessarily even – it doesn’t really Dr. Flint McLaughlin: Aaron, read that line to us, make me want to stay and spend time, but still let’s please. suppose that they’re familiar with the product already, Aaron Rosenthal: This line up at the top says buy an which is who I think you’ll get, and they enter the zip online membership? code in and they hit preview. Go to preview. Dr. Flint McLaughlin: Where is that? Way up? Let’s assume, at this point, they are bipolar or something like that, so they don’t actually click where you’d think, Aaron Rosenthal: Up here. but they go up and click on this link at the top – and I Dr. Flint McLaughlin: OK. And that’s the link we want mean that facetiously. All right. So they click there and them to click on? they arrive at this page. Now, now we’re back at this page. What was the exact text of the link? PARTICIPANT: Yes. PARTICIPANT: “Buy an online membership.” Dr. Flint McLaughlin: Congratulations. They’ve put it in the worst possible place on the page. Dr. Flint McLaughlin: “Buy an online membership.” All right. So now from that expectation, they come to PARTICIPANT: They have. Yes. We’re very familiar with this page. And, Tony, scroll down so we can see the that. whole page. All right. Scroll back up. All right. Let me have the audience help me before I turn Aaron loose Dr. Flint McLaughlin: All right. Now, we’re not on this page and get his thoughts, Aaron or Bob or optimizing that. We’re just grieving with her and then the team. These are all panelists, I’ll introduce them we’re going to optimize the page. All right? So some of to you in just a few minutes after we get underway, you have your own problems, and it’s nice to know that

Landing Page Optimization Methodology: An Exclusive Preview but someone tell me, what is the first thing you would And so it’s going to be ‘Save 50% across the country’ or do with this page? … I can feel the deep thought. All I believe used a headline on the homepage that said, right. Go ahead. “Save 50% on places you’re already eating” or something to that extent. I would absolutely test headlines on PARTICIPANT: You’ve told them to buy an online this page that immediately connect with them, show membership and now they’re coming here and nowhere them the benefit, but let them know how it’s different. does it say buy an online membership. And here’s how you’re going to do it. More so than just Dr. Flint McLaughlin: OK. I think he’s absolutely right bullet points where you’re hoping that they read each in that regard. There’s an expectation and it says Prefer one of these bullet points, make the connection of this All Your Coupons Online, but there is a gap between is how it’s going to be different than the print edition. coupons online and online membership. If that’s the Use a comparison chart. link they clicked on, then you actually need to use – you I think we saw on the first day, Flint presented a case either need to change the link in the future or you need study where MarketingSherpa used that and got a – to change the headline so that there is no thinking gap. Tony, help me out. We call it site-flow interruption. Tony Valcarcel: 76%. Do you understand that they now think for a moment, “OK, is this where I get the membership?” That’s the question Dr. Flint McLaughlin: Tony oversaw that research, in their mind. And what is the negative void? What is actually. the first question we have to help them understand? Aaron Rosenthal: 76% increase by using a comparison What is your offer? Clarity trumps persuasion. So make chart. Nothing else was changed on that page. They just it immediately identifiable as to where they are at. And added a comparison chart and it increased conversion as you’re doing that, imply precisely what the offer is. by 76%. Let me hear from the audience one more time and then I’ll get comments from you guys. Someone else. What All right. So it’s something I would absolutely test on would you do after that? Yes, Kristi. this page, comparing it to the print edition. You’re fighting with your own audience here. And you’ve made PARTICIPANT: You want to start the registration process some good points. Rather than make them join now, on this page instead of just having a ‘Join now.” Also, these are people that have clicked on a link, they’re the ‘Join now’, we want to change to ‘Start saving’ or deep into the site, they’re engaged already. They clicked ‘Start printing’, or something that’s more of a call to on a link that says they want to buy, they are ready to action. purchase. Don’t make them click again. Don’t try to up- Dr. Flint McLaughlin: That’s right. That’s all sell them. You’ve already sold them, to some extent, improvements. Aaron, go ahead and start talking. when they come here, they read the headline, they get the couple bullets, they perhaps see the comparison Aaron Rosenthal: OK. So when I come to this page, chart. They are ready to purchase. Embed the form on the headline says, “Prefer All Your Coupons Online. this page and make it as simple as possible and as few Join Entertainment Online.” These are individuals that fields as possible. have already made it through your site. They came to it because they were looking for information on the Dr. Flint McLaughlin: OK. Listen. We’re going to Entertainment Book. They’ve somehow managed to find watch our time, so I’m going to go fast. And at the the online link, as opposed to buying a physical book end of this, I’m going to try to give you something from you. actionable. Let me just – is it all right if I just rapid fire shoot at the page with everyone and get a sense Well, now this may make your other department angry, of, overall, the things that are incorrect? And then I’ll but I would immediately connect with them on the quickly move back into what I would do in terms of benefits of going online versus print. You’re almost actionable items. Before I do that, does the thing that fighting with your own audience here and, if that’s the Aaron suggested create a political issue for you? case, the benefits of going online versus print are, I believe you said, you could get nationwide coupons PARTICIPANT: It does a little bit, but we’re going to instead of coupons in your area or citywide coupons or start pushing the line a little bit more, so we’ll definitely any of that. test it.

Landing Page Optimization Methodology: An Exclusive Preview

Dr. Flint McLaughlin: What I did with the “New York jab, a straight right. You got to first set up the straight Times” to solve this when they had a struggle between right. You’re hitting them with all the punches before the electronic edition and the print edition was we you set them up. Tell them what’s coming next. Talk to actually put down a – instead of making an ad, we made them. Start the dialogue. what looked like a form. It was a beautiful customer In addition to doing that, if you’ll look here, this graphic service-oriented form on the page that said, “Select is absolutely a waste. Here’s why. In any ink path test your delivery preference.” And what happened was we checked or eye-tracker tool, they’re already going to clickthrough went through the roof because it didn’t see this part of the page first. You want to control what feel like an ad and people got exactly what they were they see first, second, and third on the page. Now, if looking for and conversion went up on both sides. you put a graphic there, it’s an absolute waste because Aaron Rosenthal: Yeah. What Flint’s talking about it’s drawing their eye to the place they’re already at. in this instance is right now you’re separating the two When they come into your site, that’s the first thing products. Rather than separate them, you have a single they see unless the headline draws it away or a graphic call to action and within that you give the preferences, draws them somewhere else. the preference options to the customer on that single This graphic would be much better pulled down here call to action or that single offer that you’re presenting somewhere on this side, if you needed that graphic, if … you were trying to get them through the key text and Dr. Flint McLaughlin: And it self-informs your down into some kind of button or form. You want to audience. actually use that valuable space there to talk to them, not just show them a picture. They’re going to look in Aaron Rosenthal: Yeah. that corner first anyway. So now what you’ve done is Dr. Flint McLaughlin: All right. But let’s just look at you’ve drawn all the attention there. the page. What I’m going to show you next will apply When you’re trying to get someone to accomplish an to most of you that are out there right now with pages, objective on a page, you need to control the eye path and what we’ve been talking about right now is the to do that. And there are five elements that will help conceptual design of the page. I want to actually attack you control the eye path: size, motion, shape, color, and the eye path and talk about the individual elements. position. I’ll say it again. Size, the size of the element, First of all, this page should be emphasizing a value the color of the element, the shape of the element, if proposition, a single very important value proposition. there’s motion – which is dangerous – and the position. It is not doing that in the headline and in every other Those are the five key ways that you can control what element of this page. Your headline will either emphasize somebody sees first, second, and third on the page. the value proposition or stop them from browsing and There should be a linear progression and it should go suggest it’s coming, and typically it’ll be found in the something like this: This headline helps you understand sub headline underneath it. There is no sub header. where you’re at or gets your attention. It drives you You have text that is too small. You have too many into subtext that helps you understand that – some bullets before you’ve had any greeting text. There’s no kind of connection with the audience that has come conversation. to the page. A greeting, two lines of text and maybe If I stepped up to you right now and started talking sub links in it and an introduction to the key benefits. in bullet points, we wouldn’t have any form of That’s too many benefits at the top. Three to five are all communication. You would have noise. Communication they can handle. takes a transmitter and a receiver, and you’ve got to If you have the others, use them in ancillary supporting tune the transmission so the receiver can get it. Right information, use a link that says “Tell me more,” but now, you’re assuming the receiver is going to respond drive home three to five major key points that are the to a staccato sling of bullets firing at them. You need reason they should respond, and make sure that once to tell them in the headline where they’re at. And if you’ve done that, you make it very clear what they can you have these bullets underneath it, you need to say, do today and you make it as simple as possible for them “There are seven important reasons why you need to or to respond immediately with the least possible number you might want to consider,” and I would turn it into of clicks. what’s called a – it’s kind of like if you’re in boxing, jab,

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At that point, you’ve started guiding the sequence of Dr. Flint McLaughlin: Now, I need to move on. You thoughts. And as you’ve done that, you’re going to want me to cover lots of pages, as much as we can, come to places in the sequence of thoughts where you right guys? So we’re going to move, but I still want realize they’re at a concern point. They’re wondering, to list what’s wrong with this page. I’m going to do it “Well, will I be able to get a refund if this doesn’t in bullet points and we’re done with this page. This is work? Do you have this in my area? Is the customer wrong, in the wrong location. This headline isn’t strong service good?” And that’s when you put the credibility enough and it doesn’t drive them into the text. There’s indicators right around that, but that’s probably not no greeting or connection information that sets up the until the next page because I doubt you’re going to bullet points. There are too many bullet points on the collect credit card information on this page. You might page. ‘Join Now’ is bad wording on the button and it be able to. doesn’t imply any benefit, as you’ve already mentioned, Kristi. If you’re wondering, “Well, can I collect their credit card information on this page?” It comes down to a This block of text, I don’t even know what it says, but simple, simple answer: Clarity trumps persuasion. Are it’s horrific right there. It’s horrific because, A, black on they clear enough about your offer now in order to that light blue is hard to read; B, there’s no eye path make the purchase or are you slamming them with a in there with bold or clear font. It’s long, difficult, and request for money before they’re ready? it’s stopped by a bar. This bar is a mistake also because it stops the eyes. Some people, depending on your channels, come ready to buy; those people you want to get right to the form. Aaron Rosenthal: I skipped right past that text. I Some people need time. Even in the complex sell in B- thought it was terms and conditions. to-B, it might take five steps for a more expensive item Dr. Flint McLaughlin: You never want to stop their to be sold, as opposed to two steps for a less expensive eyes with a bar. I can’t tell, are those buttons? See, they item. When they come to this page, if they’re hungry look like they’re buttons you’re supposed to click on. and ready, Kristi, then put them right to the form, but I So you have somebody up here clicking on this, trying don’t think they are based on what I’ve just seen. to understand what it is you’re looking at. You’ve got You need a conversation. I’d capture their email address to make that clear that what you’re doing is showing and first name and try to do a completion form. I’d re- them something. You’ve got to offset it or make it very market to everybody that didn’t purchase, once they got clear, otherwise they’re not going to understand where to the second page, using their email address, etc., and to click on the page. I can tell you how to do that off line. Right now I’ve got a join here, I’ve got three buttons Aaron Rosenthal: I want to add something to that. here, I’ve got a join here, and the whole page is set The credit card form may work, but where you need to in block. See the rectangle block and some kind of test it specifically is in certain channels. Your affiliate rectangle square block and then line across? The eye path marketing traffic that is promoting this. They’re going is completely convoluted in the page. It’s conflating to do a lot of the presale for you before they ever come objectives. Does that help everyone? Can I move on to here. They’re coming ready with their pocketbooks another one? OK. already out, getting ready to – they want to buy We’re going to move on and there’s a piece I want to something. So if you test that, you need to be channel- teach, but I think – should I do this? I’ve got 6 to 8 specific in where you’re testing it. slides that I think will flush out what I taught yesterday You may find that if you just came through where Flint and apply it to these pages. Should I go to those slides navigated, you weren’t able to – you didn’t build up now or go to another home page? If you want – I’m enough angst, enough desire to purchase on this page. trying to figure out when to give that to you. How Now, for those people that aren’t ready to purchase, the many would prefer I give you the 5 or 6 key points and way that you’re going to capture enough information then apply them to the pages? Let me see your hands about them so that you can re-market to them is instead up. OK. All right. That’s what I’ll do. Switch me to the of using just the ‘Join Now’ form, you’re going to use PowerPoint, Tony. an email capture on this page as well and implement This is from our landing page optimization certification a basket-recovery system. Are you familiar with basket session. Some of you that are in this room have started recovery systems? OK.

Landing Page Optimization Methodology: An Exclusive Preview

that already because you acquired the ability to do that issues of clarity?” or you did that when you purchased your ticket. I’m Now, believe me, there’s a lot more I would do. For going to take you to a breakdown of something deeper instance, this cell would never be on the side; it would that I began to teach you yesterday. This relates to our be in a vertical layout flowing vertically, not stuck over conversion index, but it’s simplification. I wrote this on the side of the page. There were things that were one slide this morning just for this group. good about the page, but there were problems. So here’s We talked yesterday about some key principle, clarity what we focused on first: We took the original page trumps persuasion. Everyone remembers that? OK. Now, and we converted it to this page, knowing we couldn’t it’s early in the morning, but I’ve got to get your minds make significant changes. But I’d like you to notice this deeply engaged. So let me start with you, just kind of bottom portion and this bottom portion. Do you see, waking you up a little bit. Everybody let’s repeat that technically, the difference? I’m going to blow I up. together. Clarity – whoops. Clarity trumps persuasion. Now, let’s talk about how we are eliminating negatives That was a test. Very good. and answering clarity. You’ll see as you go through. This All right. So now the two questions are: What is your is the original. The original ad forms friction because offer? And why should I participate? But you’ve got to there are three objectives and three evenly weighted understand that the why should I participate occurs options. Now, understand that friction is anything in the across a series of positives and negatives. We think process on your site that causes a kind of annoyance. about the positives, because we do this for you and It’s differentiated from anxiety because anxiety is because you’ll be able to do this, and we emphasize the something localized in the process that causes a kind positives, but we often fail to eliminate the negatives of concern to rise up psychologically within the person, that interfere with the reasons why someone should and you do not solve friction problems the way you participate. solve anxiety problems. So I’m going to show you, using The New York Times Anxiety must be overcorrected because it’s irrational, as an example, how we eliminated negatives while many times. Many times, the anxiety in a process is reinforcing the positives. Does that make sense for unfounded, but it’s still there and you have to fix it, everyone? And as we’re doing that, we’re going to talk and if you just meet it evenly, you don’t see the gain about two key elements from our conversion sequence in conversion. You have to overcorrect it. Friction is called friction and anxiety. different. Friction is about eliminating and minimizing all of those parts in the process that cause a kind of So here’s the background. The New York Times came to annoyance factor. And the truth is, if you eliminate all us with a subscription product that they were having friction, you won’t have a sell. So you can’t eliminate it difficulty marketing called The Electronic Edition. completely; you can only minimize it. Everyone familiar with The Electronic Edition? They’ve been marketing the product for two years. Conversion So look at this page with me. We’re going to go to Web was under .5%, growth in subscriptions had plateaued pages, but look at what we did here. We took what and this was a real issue. What could we do? Well, was three evenly weighted options, ‘Pay Now’, “Learn we helped them with their news tracker. They were More’, ‘Free Sample’. Now, let me ask you a question. a research partner. We were discovering new things If you’re someone coming to this page and your first together. And this is what we began to – really, this is option is to buy now, why in the world would you buy the page that we originally were given. It was designed now if you can learn more or get a free sample? Do you by a huge agency and this is what they had. understand what we have here? We’re mitigating the weight of this button by offering someone something Now, the beginning of this was kind of like it is with over here competing with it, and we created a mental your companies; we would like to have redesigned the friction, unsupervised thinking. There’s a stop while page completely, but that was a very political situation. they’re trying to figure out what to do and they make You couldn’t just redesign the page. So we asked the obvious choice to get a free sample. ourselves, “How could we get the greatest possible gain with the least amount of changes to this page?” And we Now, we corrected this with this simple form below defaulted back to the question and the principle that because there was a lot of, again, political issues here I talked to earlier: clarity trumps persuasion. And we and there was issues about process and which version began to look at this page and asked, “Where are there of the paper. And they couldn’t just keep it as simple as

Landing Page Optimization Methodology: An Exclusive Preview we’d like, so instead we worked with this form. And in Now, what we did here was ‘7 day, no-risk, free trial’. this form there was one button. Now, look. ‘Learn More’ Look at the difference. And guys, get this. It’s a minor had to be there and it was a great presentation, but do change at the bottom. The whole page is weak, but you see the difference between ‘Buy Now’ and ‘ with that minor change, 541% more money flows in. I can show you another one. This is a radical redesign. Learn more’? Now it’s a small link, de-emphasized We finally were able to redesign the whole page, and if compared to the button because we’re weighting you’ll see on the right, that’s how we redesigned it, and the objective of the page. Does that make sense to after all those other changes, they got another 52% on everyone? We’re using size and color and position to top of that. Here, they got a 14% lift with one word make this button get the click. being changed, and here we tried – and I’ll only show So what happened? Well, there’s the test results. you this much, and we’re almost done. Increase in orders 65%. That’s a lot of revenue. That’s a Standard copy versus long copy. How many of you would lot of revenue. So what we did, essentially, was reduce think that the standard copy would produce the most? friction. This is what we got away with. But, when we were able Now, we had issues with anxiety. In the second major to increase the length of the page, we got an 80% test, we tested the regular pay upfront offer against a increase in order. Long copy can still sell, particularly seven-day free trial, to see if we convert more customers with publishing, depending on what it is you’re trying to paid subscribers. The free trial converted 541% better to communicate. Why is long copy better? Someone than the standard pay up front offer. They had tried free tell me why long – what is the rule? Based on what trials in the past and they hadn’t worked because they we’ve taught thus far, why could it be that long copy had not eliminated the anxiety in the process. But, by would help increase conversion. Yes, it increases clarity reducing the anxiety in the way we designed the free and clarity trumps persuasion. If you took all of the trial, they were able to get a 541% lift. compound results of this, of each of these incremental improvements, it’s a 1,052% increase in conversion. Now, look at reducing anxiety here. How is anxiety reduced in this test that led to 541% increase in Now, let’s back up from that and go back to this conversion? In the original offer, there were paid offers original slide, and let me help you understand why it’s that listed the prices and a free trial offer. Now, please worthwhile to take that brief point, because what I’d notice this. Do you see this? This is a mistake many of like you to be doing now – because I’m going to ask you us are probably making in the room. Even though this to help me when we go to the next Web page – I want is a free trial, we’re telling them over here that it’s 50% you to find in your search for clarity, first of all, ask: “Is off, intro 7 days, and then the price, and then again the the offer clear?” In your search for the answer to “Why price, and then again the price, because they’re trying should I participate?” don’t just look at the positives, to be clear with people. But what they’re doing is they’re but now start eliminating negatives; in particular, contradicting their own subvalue proposition by telling look for friction and anxiety. Does that make sense to you it’s free and then telling you what the price is. everyone? Can I give you another example I see on 50% or more So let’s go to a Web page, Tony. These are all pages of the Web pages that have a free trial? They have that were submitted yesterday and I’m going to get credit card logos on the pages. Now, on the one hand, help from the team. I’ll officially introduce these guys you’re telling them that it’s true, and on the other now. This is Bob Lorum. He oversees all of our research hand, you’re promoting MasterCard and Visa’s brand. partnerships. This is Aaron Rosenthal. Aaron oversees Why? In the early days of the Internet, it helped to our channels research. One of the projects I gave Aaron tell people you accepted credit cards because many during his training was, after he’d gone through lots people – it was new, and there were only a few cards of optimization and testing and specialty channels accepted, and sometimes people were using Pay Pal. expertise, we gave him a website and said, “We want Anyone today expects you to accept all major credit you to build the website.” It had $5,000 a month in cards. Do not promote Visa and MasterCard because you revenue. He was 20 – how old were you, Aaron? create anxiety. Free trial, and then all this stuff about Aaron Rosenthal: 27. payment, big logos down at the bottom. If it’s free, then it needs to feel free. Dr. Flint McLaughlin: No, how old were you then?

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Aaron Rosenthal: 27. a number of ways. Maybe if we go to the upper left button in the nav, “WIE Magazine.” Well, actually, go to Dr. Flint McLaughlin: 27? Goodness, man. So he the top. Let me see here. was an old guy by then. He went in three months from $5,000 a month off this site that had been there a year Dr. Flint McLaughlin: Go to the top? – it was kind of a little sample project I placed on the PARTICIPANT: Back in the nav, if you go to WIE side – went to $160,000 a month. In 12 months, we homepage. had an offer for $8 million to $10 million for that little site and it grew by over 1,000% in 12 months. It was all Dr. Flint McLaughlin: OK. All right. optimization of the channels and the presentation. PARTICIPANT: So this site has issues, but if you see So we’ve got Aaron. Tony works in our Sciences group. – there’s a couple ways. There’s audios and videos in the He went through our apprenticeship program, and upper nav and there’s also that left side bar nav, audios he’s been loaned to the Marketing group to help bring and videos of the future – on the side bar. Yeah, that Sciences across our own marketing as we’re working button right there. through MarketingSherpa and others. And so they’re going to be helping us. I’m going to get help from the Dr. Flint McLaughlin: Now, how important is this to audience. We’ve got a site up right now. Who’s here that your revenue in terms of percentage or impact? submitted this site? OK …Tell us what the mission is PARTICIPANT: It’s definitely important. We’re competing of this site. with a lot of different kinds of business units, but it is PARTICIPANT: So this is an online subscription service. important. Dr. Flint McLaughlin: All right. And, Fred, what’s the Dr. Flint McLaughlin: OK. There is a way to triple name of the company? clickthrough to that page … The problem is you’re competing with your own advertisers. Big mistake. PARTICIPANT: So, it’s an interesting situation here There’s a way to use the center pane to weigh more because this site is embedded in a magazine site, which people into that, and we can talk about it, but I want is one of our main products called What is Enlightenment to take you to the page and let’s optimize. So let’s click Magazine. And this site, WIE Unbound, What is on the link itself. Click on the ad. Good. So now we Enlightenment Unbound, is our online multimedia site, come to this page. We clicked on that ad. What is the which puts up an audio each week, recurring billing, question, everybody? How clear is the offer to you right with leading edge thinkers, visionaries, thought leaders now? who we often feature in the magazine, Deepak Chopra, Eckhart Tolle, Michael Beckwith, Andrew Cohen. It’s not clear. All right. Now, tell me why it’s not clear. What do you think when you come to the page? Let’s And this is a subscription service embedded in the do a focus group for a second. What do you sense when magazine site. So the nav on the side includes the you come to the page? Just lift your hand up. All right. magazine, some of our other offers. So it isn’t a stand- Somebody right there. alone landing page, per se, but it’s kind of like the page we just looked at. It is a site within a site. PARTICIPANT: I’m Dan and I would think that you could listen to – I wouldn’t think it’s a subscription service. Dr. Flint McLaughlin: All right. So let’s stop there for I would just think that this is where a library of audio a minute. What’s the first thing we need to be asking, clips are. guys? Dr. Flint McLaughlin: OK. Scroll down and let’s see Participants: What’s the value proposition? the whole page too. OK. Scroll all the way down. What do those two buttons say? ‘Play a clip’. And what is this? Dr. Flint McLaughlin: Yes. All right. Now before – ‘More’. All right. Scroll back up. Somebody else. What let’s back up a little bit. Even before we ask what the do you think when you come to this site? What do you offer is – and you can ask that first, but I need to get see? Scroll up to the top, Tony. Someone else. What’s inside the train of thought. All right? And I’m clueless the sense? What would you change in this field right as to the train of thought so take me backwards. Where here at the top? do I need to go to see how I get here? PARTICIPANT: Headline. PARTICIPANT: Well, you could have gotten to this page

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Dr. Flint McLaughlin: Headline. All right. A headline. to identify your most popular people, highlight them, What else? and then guide the user through those people into some sort of entrance to the purchase funnel, which is buried PARTICIPANT: A greeting. on the middle right-hand side. It almost looks like a Dr. Flint McLaughlin: Greeting. All right. What else? banner over here. And this is what you want them to All right. There’s strategy and then there’s what’s wrong do on the page; you want them to start their free trial. with the page from the negative standpoint of the why. And it’s below the fold and, again, like a banner-type We talked about eliminating friction and anxiety. I want format. to make a categorical overview of the page and then Now, these boxes here, ‘This Week’s Featured Audio’, we’re going to drill down on the pieces rapidly and go these seem to almost get in the way of the objective of to another page. OK? the page rather than support it. All of the elements on First of all, if you scroll down this page, you need to ask the page either support the value proposition or detract yourself, and you need to be reminded that people don’t from it. And right now, I believe the value proposition buy from websites; people buy from people. Now go of the page is that you offer these audio clips from back up and look at the personality of the page. Is this visionaries, mystics, scientists. And the idea is to inform a person communicating clearly or does this feel like it people that that’s what they’re here to do and then was – someone said, “A camel is a horse assembled by allow them to do it as quickly and clearly as possible. a committee.” Does it feel like lots of moving parts put Also, I don’t see anything from anyone here that together and then placed on a page? Do you see that? indicates that someone else has used this product and What we’re lacking overall, before you drill down deeply, found it valuable, which seems to me like that would be is the kind of integrity of the offer flowing in a sequence one of your key ways to target this audience. so that people understand? It’s all boxes, bars, and Dr. Flint McLaughlin: All right. Aaron? clips. And never, never, never build your landing page around boxes, bars, and clips. All of those boxes and bars Aaron Rosenthal: All right. When I come this page, compete with each other and they silo the conversation I’m immediately confused. I’ve just clicked on an audio/ into individual pieces and the person trying to talk video text link or banner, but you’re not immediately to this website, trying to dialogue with it mentally is connecting with me. It’s WIE Unbound and I don’t know unable to process, in the proper order, the sequence of what that means. You probably had a great branding thoughts necessary to arrive at the conclusion you want strategy and you know exactly what that means, but them to arrive at, which is to subscribe or to click on I have no idea and I’m your customer. So you have to a subscription button, at the very least. Does everyone directly connect with me in that headline. If it’s audio follow that so far? All right. and video, tell me – you have 5,000 audio – well, I don’t want to go into solutions yet. Let me just keep So then let me turn loose any one of these three guys pointing out the problems. and start talking about the page itself. All I want to identify right now are problems, and then we’re going Immediately under that headline – and it’s not just the to break down and identify what we would change, verbiage, too. You lose the headline when you include actionables. So let’s just nail problems down. Anybody. it in a banner. You’re not speaking to somebody, you’re Any one of you three. Tony, go ahead. You first. creating a pretty graphic. This picture does not connect with me. I don’t know what this is and I’m almost Tony Valcarcel: Well, first, identifying the fact that, struggling because it’s so overpowering, directly next again, you’re not telling them what to do. You need to the copy that actually does tell me what you have to guide the user through the process. And right now and what you do. It’s competing with it and draws my you’re introducing yourself, which is something that if attention away and it serves me no good. they’ve gotten to the page through the channels that you’ve identified, they know who you are. They know These images down here, if I know who these speakers you’re WIE Unbound and they know they’re on the online are and they help me, then I still don’t know that this is audio and video section. Tell them why they should be the right place for it. For everybody who doesn’t know interested in the online audio and video section. immediately who these speakers are from picture or even their name below, you’re adding another disconnect. I’m not terribly familiar with the clips you have down And you’ve made them get through a banner, an image, here, but it seems to me that you would be better served

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images of speakers, and they still have no idea of what components. this is. And this is a free trial offer, and you haven’t If I was asked to optimize the page, the first thing I presented that information to me yet and, in fact, I had would do is print it and burn it; just a symbolic way to to hunt for it over on the right-hand side. That’s the get my thoughts clear. And then I’d go back and start worst place to move it. over, literally completely start over. OK? So let’s move When people come to pages, they go top to bottom, on to another page, and I’ll be happy to help you more left to right. So you’ve just put this in almost the worst offline. And, again, I’m emphasizing a point, but I’m place on the page, which is the right hand bottom side not trying to give you an inferiority complex for life. of the page. It’s below the fold, nobody sees it, you OK? aren’t mentioning that you have a free trial offer earlier All right. Let’s move on. Another one. American Banker. on in the page. I still see this huge member log in, Let’s scroll down so we can see the whole page. Is this and are you catering to the people that have already the home page. Is this the home page? Who submitted subscribed or are you trying to get new subscribers? American Banker? Let me see your hand. OK. Whoever Because you’re putting this in a more dominant position submitted American Banker has left the building. Having than the free trial offer. heard me just rake the other guy over the coals, they’re The ‘Play this clip now’ library, I’m immediately taken not about to lift their hand. So let’s scroll down and to a new page. You want to keep them focused on the let’s scroll up. We’ll come back to this page. If they’re in objective. Now, if your next page – and this is what the room, we’ll come back. Take me to another page. All I would ask – if your next page does a better job of right. MDR. Who submitted MDR? Let me see your hand. selling then, there may be some reason for taking them Good. MDR. Tell us what is the objective of this page? to the new page. However, if it doesn’t, use a – PARTICIPANT: This is our home page and it’s an Dr. Flint McLaughlin: If it does, it should be this overview of all our products and what we can do for our page. products. Can I just – we’ve got to move. Are we going too slow, Dr. Flint McLaughlin: All right. Now, the first thing guys, or is this pace right for you? Talk to me. Is this you have to do about a home page that makes it – can we go faster or should we go this speed? What’s especially difficult and dangerous is ask yourself, “What that? is the objective of the page?” Now, the reason that’s important is this is not a landing page sometimes with Faster. a single objective and so what you end up with is trying Aaron Rosenthal: OK. to do six things on the same page, which means you do six things poorly because you’re not focusing on the Dr. Flint McLaughlin: I’m going to try to go faster main thing. So what I need to understand is how can then with us, guys, because I’m looking at our time and we help you make more money with this page? Where do I want to get through many pages. This is – and can I we want people to click? – and is it Fred, that’s the first name? And, Fred, I’m sure you didn’t design the page yourself, so can I just PARTICIPANT: Well, my particular product is Market View. say this, and I mean this graciously. It’s a horrifically It’s an online subscription. horrible page. And this is good news because you can Dr. Flint McLaughlin: Market View. All right. So we make a lot more money than you’re making right now, want them to click on Market View? guaranteed. PARTICIPANT: Yeah. PARTICIPANT: Amen. Dr. Flint McLaughlin: All right. So does that take me Dr. Flint McLaughlin: OK. It’s a series – it’s component to a landing page? thinking instead of dialogue. It’s all kinds of components moved on the page and assembled together. There’s not PARTICIPANT: Yes. a dialogue that tells me where I’m at, what it is you Dr. Flint McLaughlin: And is that the one you’d like do for me, how many thousands of clips I can access, us to look at first? what the primary benefits are for this, why I should do it and do it today, and then ask me to do it. That’s what PARTICIPANT: Yeah. this page needs to do instead of essentially assembling

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Dr. Flint McLaughlin: Let’s go there. All right. This is What was it? What’s the letter? F. It stands for what? a perfect example of what it is that we’re here to try to Friction. I have all of those friction elements that I do today. Guys, listen. Be of good cheer. Everyone on have to wade through before I actually get to the point the Internet is doing so bad that if you do even a little of acquisition. And you’ve got to understand that, good, you’re going to win. You’re competitors don’t get apart from the value proposition of this offer, there is it. It’s not like we’re doing this 50% good and we can a separate value proposition right here. You have to get better. It’s just horrific in many cases how we don’t give me a reason that makes it worthwhile for me to seem to understand the cognitive process that people go through all this pain, and that reason’s not on the are going through. And that’s not bad. This is a new page. industry, it’s a new technology, it’s a new medium, and There’s no credibility indicators over here, there’s no we’re in the early stages. headline up there, there’s no connection that tells me So here, we came from that link. Take us back. Aaron, I’m exactly what the product is. There’s no text underneath going to let you, Bob, or Tony – we’re going to do these it that probably gives me a little introduction and then fast and move to more pages. I’d like to get as many right into key bullet points and makes it precisely clear. pages as I can. All right. So I clicked on Market View. There’s no sense as to why I should purchase today and Hold on for a second. What is MDR? See, the branding is I don’t know why this form is here. I don’t even know bad, the logos. I don’t know what ‘Grow With Us’ means. why it – does this mean I’m buying? I’m assuming someone else knows that who comes here, PARTICIPANT: No. The free trial. but I don’t know what it means. Dr. Flint McLaughlin: It’s for the free trial. So scroll PARTICIPANT: Well, we are the leader in our industry back up. See, I see the trial here. This is the basis of and we have about an 80% market share. a real headline, which needs to be up there. Does that Dr. Flint McLaughlin: What does MDR mean? make sense? So I get to the page, but you don’t even say free trial until you tell me what Market View is. I PARTICIPANT: Well, it’s Market Data Retrieval. either need a headline that suggests Market View is very Dr. Flint McLaughlin: OK. So it’s Market Data Retrieval. powerful, and then a sub header that tells me I can try So I would have some sense that Market View is one of it for free, or I need a header that tells me I can try those kind of products if I was on this page. Market View for free and a sub headline that tells me essentially what it is in a single phrase or sentence. And PARTICIPANT: Well, that’s a problem. then I need text that says Market View is the X blah, Dr. Flint McLaughlin: That is a problem. All right. blah, blah, blah, blah, blah, blah, blah, blah, blah, Well, let’s not solve that one. Let’s just click on Market blah, blah, blah, warm, friendly, and clear. View. I get to this page and let’s just start cataloging I probably need a little pop-up that says more, in case what’s wrong with it. Let’s go back to the questions. I need more decision time, more information. And then Number one – before I do that, you need to humor me. I need to be brought to not this long form; I need Clarity – to be brought to probably two fields, name and email PARTICIPANT: - trumps persuasion. address. ‘Start your free trial today’. Name and email address. As soon as I enter the name and email address, Dr. Flint McLaughlin: All right. Now, what am I not the confirmation page clicks up and requests additional clear about on this page? Tell me. information, including – do you ask for a credit card? PARTICIPANT: What you’re signing up for. PARTICIPANT: No. Dr. Flint McLaughlin: OK. I’m not exactly clear what Dr. Flint McLaughlin: OK. Well – I’m signing up for and I’m certainly not clear as to why I should buy it. And though I’m not clear of either one, Aaron Rosenthal: Start. you’re already asking me for this information. So here’s Dr. Flint McLaughlin: Yes. Yes. If you really want what’s missing: I don’t have enough positives. Remember to make significant revenue here, give them a strong under those two questions up here, I don’t have enough enough case for giving you the credit card. In other reasons and answers and clarity. And then you move me words, make the product compelling, give them the free here and I hit something that we talked about in the – and collect the credit card on the front and watch forms we looked at during that brief teaching segment.

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your revenue go up four or five fold. And if it’s in your case, make it a plus. PARTICIPANT: Well, this is a very expensive product and Aaron Rosenthal: And get past all the friction and we can’t accept credit cards. the anxiety of what is this product by giving me really strong testimonials from other customers that have Aaron Rosenthal: So do you have outbound call tried this thing, that love it, that rave about you. Put support to – it next to the form. PARTICIPANT: So we have to make – we do outbound Dr. Flint McLaughlin: Yes. Yes. We’re going to move calling. on. Does that help everyone? Can I go to another Dr. Flint McLaughlin: So you do outbound calls to website? All right. Next one. Next one. Weight Watchers. people who fill in the free trial? So is this lead gen? I’ve never heard of this company; small little company. Who is from Weight Watchers? I’m teasing. Who are PARTICIPANT: Yes. they? Where are they? OK. Good. Dr. Flint McLaughlin: So it’s not really a standard Stop dieting, start living, learn more. All right. Audience, free trial. It’s lead gen. do you want to tear this down or do you want us to just PARTICIPANT: Well, it’s they get to try it for 15 days and get to it so we can go faster through pages? Talk to me. then we follow up with them and see how it’s going. Go. All right. So, Aaron, you got three minutes and then I’m going to hit it hard. Dr. Flint McLaughlin: All right. Well, then I would be collecting the name and telephone number, along Aaron Rosenthal: All right. with the email address, then move them to the next Dr. Flint McLaughlin: Or Bob or Tony. Either one. page, bring them into the additional information you need to get them started right away in the free trial, Aaron Rosenthal: Stop dieting, start living; it’s like a and then follow up immediately within typically 120 branding headline. It doesn’t immediately connect with minutes with a phone call to anyone who completed the me. I don’t know what you want me to do on this page. form, and then follow in that way. Does that make sense Speak to me, tell me what your value proposition is, tell to everyone? I want to get – I’m going to take one guy. me why you’re different than Nutrisystem, tell me why Who wants to talk the most? you’re different than the Atkin’s Diet. I want to know why I can go with Weight Watchers and not any of your Aaron Rosenthal: Let me say just something. other competitors. Dr. Flint McLaughlin: Do this and we’re going to ‘Learn more’. What do you want me to do on this page? move on. You got several competing calls to action. You got a Aaron Rosenthal: There’s company value propositions ‘Learn More’ button that screams at me, and then and there’s product value propositions. On your home you’ve got some – this says ‘Weight Watchers meetings’, page you need to absolutely emphasize your company ‘Weight Watchers Online’ over here, and then you’ve got value proposition. On this page, you need to be talking additional links and information over here. What would about your product value proposition. These people you like me to do when I come to this page? I’m still don’t know what Market View is. Tell me why I need it, confused. I’m not even sure where I’m supposed to go. why I want it. Tell me why this product is going to help Dr. Flint McLaughlin: What happens when you click me, and then back it up with that free trial information. on ‘Learn more’? Where do you go? You hide stuff like trial subscription up in the banner, but nobody ever sees that. PARTICIPANT: You drop into the home page. Dr. Flint McLaughlin: Nobody sees that. Yeah. That’s Dr. Flint McLaughlin: You drop into the home page? banner blind. The other thing is tell them no credit card PARTICIPANT: Lots of opportunity for bringing up required. If you’re one of those rare cases that isn’t revenue. going to use a credit card, scream it to them. That way get them through the form. Ask for their name, ask for Aaron Rosenthal: Flint often uses the phrase of their phone number, ask for their email address and tell unsupervised thinking. And it sounds funny to think them a credit card will not be required, and you’ll get like that, but you do. You have to guide your customers. conversion going way up because they’re used to that. You have to create a funnel, speaking to them, talking

Landing Page Optimization Methodology: An Exclusive Preview to them, giving them reasons why they should move them all through here first and make it real clear. through this process and then immediately drive them I like your sub headline here. It’s better, it’s clearer, into an actionable item. Help engage them. but you’ve stuck it in a box. The whole page is in boxes Dr. Flint McLaughlin: Everything Aaron said is very again and what happens with that? The eye path; there strong. I want to help this and move on to another is no eye path. It moves like this: Boom, boom, boom. page. Listen to me, guys, please. If you just learn one It’s granular, it’s checkerboard, bad. And that’s good lesson from this page that you can take back and apply because if you can get a vertical sequence of thoughts, to your sites, you’re all going to get an advantage. One you’re going to get an improvement. Make sense to of the most important things we’ve said is clarity trumps everyone? Let’s go to another page. persuasion. One of the most important threats to clarity Wall Street Journal. Is this a landing page? Who’s here is competing offers. from the Wall Street Journal? OK. What is your name? What you have, first of all, is an evenly weighted PARTICIPANT: Hi. I’m Allie. horizontal layout. And do you see this? This whole half of the page is evenly weighted with this half of the Dr. Flint McLaughlin: OK. And is this a landing page. So we’re right back to what I showed you with page? The New York Times. You’ve got two buttons competing with each other. Never mind that button is in a horrible PARTICIPANT: Yes. The majority of people would get place, it takes you to the wrong place. I actually like this here from clicking on an onsite link that might say description up here, but now I’ve got this competing something like either just subscribe or, actually, if you with this and then – but underneath that I have some go to the WSJ.com home page, there’s a graphic in our series of links. This page should flow – home page header that would take you directly to this page. PARTICIPANT: Assuming you have to have – because we do have to have the meetings and online offer living on Dr. Flint McLaughlin: How come that’s not linked to one page. Then how do you simplify it? your home page? Dr. Flint McLaughlin: Do you have to have this PARTICIPANT: I’m sorry? Weight Watcher – do you have to have both of these on Dr. Flint McLaughlin: How come your banner isn’t the same page? linked to your home page? PARTICIPANT: Yes. PARTICIPANT: It should be. The headline? Dr. Flint McLaughlin: Is one more important than Dr. Flint McLaughlin: It’s not. OK? So if we typed the other? it in and went to your home page, show us where we’d PARTICIPANT: We have to give them parity positioning. click from. All right. Where are we? Aaron Rosenthal: Remember The New York Times PARTICIPANT: Yeah. I’m just waiting for it to load. example where we had two calls to action and we used So next to the Wall Street Journal, there are two titles in radio buttons to distinguish the two? You could test the header. So, yeah, you’re right on it. So “The online radio buttons, you could test a dropdown. You want journal, get two weeks free”. to help – you want to guide them through. It’s like a funnel. Dr. Flint McLaughlin: All right. Click there. Dr. Flint McLaughlin: And I’d go back to the category Aaron Rosenthal: It says, “The online journal, get as to why I’d have to do that, but what you want is two weeks free. Subscribe now.” you don’t want eye path like this. You want the flow Dr. Flint McLaughlin: All right. So that’s what I want of thoughts like this with a single call of action at to hear. Click on the link. All right. Did you click on it? the bottom and, if possible, self-sort. Who wants this over this? Help them appeal. And, if at all possible, I’d Tony Valcarcel: Yeah, I got a security pop-up. have separate landing pages for either. If they have Aaron Rosenthal: And there’s two different calls to to be together, I’d prioritize one over the other and action. Is that correct? Or they both take you to the emphasize the first and have the second. And if I had to same page though? make them equal, I’d do it down in the body and I’d sell

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PARTICIPANT: They take you to two different pages. Aaron Rosenthal: I’m not – I don’t immediately There’s a reason why we need to do that. connect WSJ.com with an online edition. I think it needs to be very specific. Print edition, online edition, Dr. Flint McLaughlin: All right. So read the text back both. to me now. What was the text of the ad? Read the ad text to me, Aaron. Dr. Flint McLaughlin: Scroll up. Scroll up. OK. I’m just going to weigh in. I’ll tell you what I’m going to Aaron Rosenthal: There’s two calls to action next try to do. I’ve got like 10 minutes. I’m going to try to to one another. One says, “The online journal, get two take landing pages right from the audience real fast and weeks free.” The other one says, “The printed journal, hit you real quick in our last 10 minutes. We’re going get two weeks free. Subscribe now.” to make it as – unless – I don’t know how many pages I Dr. Flint McLaughlin: All right. There’s a better way have left, but we’re going to – I’m going to try real hard to do that and I’ve discovered it. If you talk to us off to help as many of you that are in the audience, but can line, we can show you how. You’ll get a much stronger we just look at this for a quick second? click on both and have happier customers. But let’s just First of all, I come to this. I need to know where I’m go to this one right now. So you land on this page. at. I need to know what the offer is. That sounds like Guys, what would you say is the – we’re focusing right we know what the offer is, but coming from the link, now on issues. What’s the first issue, Aaron? you haven’t greeted me. There’s no connection, there’s Aaron Rosenthal: Well, you just told me it’s two weeks no text, you’re not explaining to me, select from three free and I now see this, but when I immediately come options. I need to be told what I’m supposed to do here. to this page, I was looking to see if you had a trial. I And then when you emphasize the price at that high completely missed it and the reason being is I’m drawn level, what you’re screaming is money on the page that to the prices. Those are the most dominant element you you said, “Free trial.” It’s site-flow interruption with have on the page is the price. You just told me it was a a disconnect. The disconnect between my expectation free trial and then you’re blaring the price in my face, so and what I see in those three numbers is mitigating there’s an immediate disconnect between the customer conversion. and your page. What you’re doing when you ask people to make this Now, when I get more into it, you’re – these are two – selection – and you have to ask them to make some, I do they’re all evenly weighted elements. You haven’t greeted understand that. What you’re doing is you’re deferring me with any headline text. You haven’t supported why I decisions. They’ll have to go back and think, “Well, do I should subscribe and what I’m going to get. Now, these want this or do I want that?” and you lose them in the people are on Wall Street Journal, they’ve just clicked stall. First you need to convince them to buy. Then you on the subscribe link. You don’t need a lot of copy, but need to ask them to choose. Do you understand? There’s at least reinforce what they’re getting out of this. a big difference. And then you’ve got three competing elements and Do not conflate the two thought sequences. The first you’re asking me to select, with these hidden radio sequence is to get them to say, “OK, I want to do this.” buttons underneath the images, which are not included And then the next sequence is to get them to choose. in this background color. I don’t even realize what I’m What we’re doing here is – just because they clicked on supposed to do here. I’m immediately confused because that link does not mean they’re ready to buy. I need to there’s no select button at the bottom of the page. understand a little bit about where I’m at and what the What happens is – Tony, click one of the little radio free trial is and why I should do it and why I should do button selects. it today and then de-emphasize the price, even if you have it, and just have me select. PARTICIPANT: Oh, don’t click that one. You’re going to a different page. Again, there’s a technical reason why It shouldn’t be giant, competing square rectangles. It we have to do that. The other two offers don’t do that, should be text, bullets, and then down at the bottom but yeah, if – a much smaller choice; this, this, or this. The page is presuming that people have the answer to what is Aaron Rosenthal: There’s a better way to do it. the offer and why should I purchase, and then it’s just Dr. Flint McLaughlin: Back up. Let me see that. telling you to make your selection. Does that make sense to our – I forgot your first name.

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PARTICIPANT: It’s Allie. Yes. Thank you. That’s very button. And I don’t understand why it says search and helpful. find on the same button. It’s very confusing as to what the nature of the button is and why I should do that. I Dr. Flint McLaughlin: OK. All right. And if you put do understand that you’ve got to sort people, so you’ve something together, maybe we’ll look at it for you got three buttons across the top. Is that right? before you go live just to try and help you, if you try to change this. We’ve been right through this particular PARTICIPANT: That’s right. issue before and there’s a – you can have a huge impact Dr. Flint McLaughlin: So, the way you sort them is on conversion if you get this straight. OK? you connect with them. Now, remember, again, people PARTICIPANT: Great. Thank you. don’t buy from websites. Talk to them. Come to the website, tell them how to use it. There are three kinds Dr. Flint McLaughlin: All right. Do we have any more of people that come to this website. Or if you’re an pages there? employer or if you’re a job seeker, click here. It should Tony Valcarcel: Yeah, Automotive News. be embedded in text with underlying blue links telling them “This is where you’re at, this is how to find what Dr. Flint McLaughlin: All right. We’ll go there quickly. you’re looking for. If you’re this, click here. If you’re Automotive News. All right. Is this the landing page? that, click there. If you’re that, click here.” Who submitted Automotive News? Good. Anyone else? Keep going. My greeting text would say something like – I’m just making this up – “For 14 years, Jobs in Sports has been Tony Valcarcel: That’s it. the number one site on the Internet or the largest site Dr. Flint McLaughlin: All right. Good. Somebody give on the Internet with over 14,000 listings for people.” me your URL. Yes. I’d get really clear. We have – “whatever your value is, “We have the largest” or “We’re specialists” or “All PARTICIPANT: JobsinSports.com. we do here, all we focus on is jobs in sports. We have Dr. Flint McLaughlin: JobsinSports.com. Type it at 23,000 jobs listed in sports or 2,300.” the top. All right. Let me ask the audience this: Are you And once I was really clear about this, what’s unique guys learning? Is this helping you? OK. JobsinSports. about your value proposition, the single reason why I com. Here we are. Do that again. Scroll over that. should purchase from you if I’m you’re ideal customer. Drag your mouse. OK. All right. Now, you guys have Once that’s clear in that paragraph, I would direct been sitting in on two days of this. I expect you’re all them into where they need to click if that’s what you’re optimization experts right now. Somebody please tell doing. And if they don’t, I would minimize these three me the top three things you’d do on this site. Tell me and say: Who’s the main group that land on this page? fast. You tell me the top three things you’d do. And I would greet them not with – this whole thing PARTICIPANT: OK. I would – gosh, I’m not sure exactly would be gone. This would be flowing text. The bullet what I want to do here. I don’t know what I would points would be in it and I’d tell them how to subscribe. subscribe to, as opposed to being a job seeker, so I It would be vertical and sequential and I’d only be the would want to clarify that. I do like that they have the self-sorting piece that I described if you have to. Does Better Business Bureau, so there’s some credibility. I that make sense for you? don’t know that I liked that when you were scrolling PARTICIPANT: Yes. Yes, it does. over when it popped up, what that all said, but – Dr. Flint McLaughlin: OK. All right. You can follow Dr. Flint McLaughlin: OK. All right. That’s a good up. Our guys will be in the booth all day, and follow point. Just for the sake of speed, let me just show you up more. Somebody give me one more site. We got five something quickly, everyone. All right. First of all, we’ve more minutes. Yes? got a problem with the layout. Can everyone see what the problem is with the layout? What is it? PARTICIPANT: It would be helpful if – it’s great to rip these sites apart, but show two or three sites that you PARTICIPANT: It’s horizontal. think are just exceptionally well done. Maybe there’s Dr. Flint McLaughlin: It’s a horizontal layout and some ways to look at it from the other side. we’re not clear. Again, clarity trumps persuasion. I don’t understand to click on that or this really big orange

Landing Page Optimization Methodology: An Exclusive Preview

Dr. Flint McLaughlin: I will. All right? I will. I’ll do drags over. Scroll down and just close it out. For people that right now. I’m not going to go our site, but I’m who need more – scroll down. Close that. Scroll back going to take one page from it that I designed that I’m up. Do you see this link right here? There’s other links going to show you why we did it. So go to MECLabs, along the way and as you get to those links, how much MarketingExperiments.com. I want to say to everyone can it help you? We don’t try to do all that lifting on here that in every site I look at we find things, including one page. So take that when it’s loaded. Let it load and our own and everyone else’s that we can improve. The scroll down a little bit. bottom line is just the find ROI with experimentation Tony, take me all the way down the page. Keep going. The and testing. schedule, so you get clarity. Look at all the companies Let’s scroll – click on the banner. I’m not wild about the that are already part of these programs. Look how the banner, but I wrote the landing page, and I was helped cost is broken out with a matrix showing you what you with the landing page, and I want you to get a sense of save. Look at an example of before and after. Look at what we’ve done. Now, I’m not selling our site. I’m just the actual quote from the person who got it. Look at thinking of the first thing that comes to mind. Look at the ‘Reserve your seat now’, and then look at the two the headline. It doesn’t sound like much, but it tells reasons, urgency, “Last event sold out.” It tells you you exactly what this is and where you’re going, and why you should do it now, first and second. The last the sub header does the heavy lifting. “Optimize your event sold out. That’s an honest statement. No false key Web pages in just 12 hours. Get expert analysis. deadlines. It’s every piece. And then look how simple Achieve professional certification.” We want it to be the sign-up is. exceptionally clear. The greeting text emphasizes that Now, I want to show you what happens when you do this there’s a problem, but it does it with implications, saying but, Tony, show them the page that – the pop-up that “The fastest, least expensive way to increase your sales came up … I didn’t embed that in the body because is to optimize your Web pages, but optimization can be it would have been too much, but for the person that difficult.” You see how we’re building the problem? needs more, it’s all there in the little embedded links The challenge isn’t developing a way to test. There’s and it’s done to keep you moving. Tony, do a first name, differentiation between tools. But the challenge – there last name. are many tools for this. The challenge is discovering PARTICIPANT:You didn’t test – have you tested what changes to test. those...? Then in the text, clarity. Now, this is a different kind Dr. Flint McLaughlin: Yes. Yes. of sell than some of your offers, but it’s an information sell. We start to lay out what it is. Scroll down. The Aaron Rosenthal: And they’re not JavaScript. It’s just right-hand column is all credibility indicators. The a resized window. center lays out the three primary things, and it tells you you’ll gain three essential benefits. One, two, three. The Dr. Flint McLaughlin: Yeah, it’s not JavaScript. And certificate down here is designed to help you visualize if you look at the top of the page, it still looks like an what it would be like if you achieved your certification, order form. This page can be improved, by the way, but and it’s driven down low to get you into this place. up there we’re still selling and emphasizing what it is you need to, and if you put in a credit card number This is the highest value offer. It’s legitimate value. and reserve your seat, do you know what would happen And what we’ve done is use the graphics and stand- next? It would offer the same course for $995 for anyone alone to emphasize it so it doesn’t get lost in a long you want to bring, which is less than half the price. Do page. It explains what’s going to happen for the people you see how it continues? who take the certification. It explains how their page is going to be critiqued with live video and sent back If we offered that too early in the course, it gets in the to them to help them make certain that they don’t just flow of the sequence of thoughts. After you’ve made get certified. It lays your instructors out, but all along the decision to purchase, then we present you with the way it uses embedded links like this. Click on see the opportunity to bring someone else. It’s all in the the full bios. sequence of thoughts. When he clicks on that link that’s coming up, it’ll pop Now, back up, Tony. Hit the back button. See the selling on up on your screen. It drags you over. Drag that over. It the right-hand side? These are actual testimonials. This

Landing Page Optimization Methodology: An Exclusive Preview is a landing page designed for a MarketingExperiments- type customer, and that’s different than what we might design for someone else. This is a landing page that’s essentially long copy, but not too long, supported by pop-ups. It builds the problem. It eliminates friction. It tries to provide clarity and it tries to give you reasons why. Now, if you want to have fun, particularly if I insulted your page today, you can download this page and beat the snot out of us and send us emails about all the things that are wrong with it. And, really, I’d like to test six versions against it. There are no perfect landing pages, but this is an example of what we’re talking about. All right. I’ve got to stop and get us going to the next events that are coming up.

Web 2.0 Strategies for Acquisition & Retention

Session Description Blogs, social networking sites, wikis and other Web 2.0 applications are playing a critical role in the marketing Oz Sultan, The Economist of online subscriptions and turning groups of individual About The Economist subscribers into communities. Gain the latest insights into building a subscriber base through social media The Economist is an authoritative weekly newspaper and gaining the trust of your subscribers through user focusing on international politics and business news generated content. Learn about proven tools and and opinion. hear case studies about how to fine-tune your Web 2.0 strategy to reach out to new prospects, create new and Moderated by: valuable content, and foster product evangelism.

Greg Jarboe About the Presenters President & Co-Founder, SEO-PR Jamie Steven Sr. Marketing Manager Rhapsody Greg Jarboe is president and co-founder of SEO-PR. Ecommerce Marketing, Jarboe is one of the successful online marketing gurus Rhapsody featured in Michael Miller’s book, Online Marketing Jamie Steven is a Senior Marketing Manager for Rhapsody, Heroes. Jarboe is also news search, blog search and the #1 digital music subscription service and a strong #2 PR correspondent for the Search Engine Watch Blog as in the download-to-own space. Steven’s role includes well as a frequent speaker at Search Engine Strategies managing optimization of Ecommerce across several conferences and MarketingSherpa summits. Jarboe has online sales channels as well as identifying new ways to more than 25 years of experience in public relations, market the service. Steven has 12 years of experience marketing and search engine optimization at Lotus, in marketing, ecommerce, product development and Ziff-Davis and other companies. program management for companies such as Microsoft, BestBuy.com, Speakeasy and DocuSign. About Seo-PR: About Rhapsody SEO-PR is a search engine optimization and public relations firm that pioneered “the tactic known as Rhapsody is the #1 digital music subscription service SEO PR,” according to Tad Clarke, MarketingSherpa’s and a strong #2 in the download-to-own space. Editorial Director.

PRESENTATION to be leading our discussion. Next to him we have MODERATOR: Good morning again. Welcome back …We Jamie Steven from Rhapsody Ecommerce. It’s a division want to start off today jumping back into one of the of Real Networks. Then we have Oz Sultan who is most big topics that came up in a few different presentations recently of The Economist. yesterday, and is also something that I know from the These guys are going to talk a little bit about social reporting that I’ve been doing, and the interviews media, Web 2.0 strategies. Let’s give them a round of I’ve been doing that a lot of people are interested in. applause and welcome them. That’s really kind of understanding social media, Web 2.0, whatever you want to call it, seeing what ways Greg Jarboe: Thank you. I’m the moderator, which is publishers or online service providers can sort of tap one of those loosely defined job descriptions which says into these growing networks and understand what role either I ask questions or I get provocative. I’m not quite they’re going to play in your company’s marketing going sure what’s going to happen today. forward. The first set of questions I want to ask is how many of We’ve got a panel ... Greg Jarboe from SEO PR is going you here are currently engaged in Web 2.0, social media

Web 2.0 Strategies for Acquisition & Retention experiments for your company? Raise your hand. OK. to Tacit Knowledge to take over their social media How many of you have figured out how to make a lot of practice. money doing it? OK. While at The Economist, I was involved with The So, I think those are the parameters we’re going to try Economist intelligence unit, as well as TheEconomist. to tackle today: It’s new, it’s interesting, it’s hot. It’s com, kind of helping them work through what is a not quite into the flow where you put the quarter in the productizable platform for Web 2.0 technologies. What jukebox and results come out. can be leveraged to make money right now? But, at the same time, how do you extend that through your One of the things I want to do is turn to our panelists. Facebook strategy and any other online strategy that Why don’t we begin. Jamie, why don’t you give a brief you might have coming from the focus of widgets, description of Rhapsody and what you do there. to Facebook applications, to figuring out retention Jamie Steven: Great. Rhapsody … is a division of Real strategies. Networks, and also MTV Networks. It is a digital music Greg Jarboe: OK, let’s get practical. Last night, there subscription service. The way our business model works were a couple of the attendees here who I’ve met at is that you pay a monthly subscription fee and you have previous MarketingSherpa conferences. They pulled me access to our entire music library of five million songs. aside and said, “If you’re going to moderate this panel, We compete with Apple, but in a sense it’s a little here’s the question you’ve got to ask. Show me the indirect because Apple uses the model where they sell money.” music and albums individually for 99 cents or $10 per Jamie Steven: Yes, sir. album. We take the approach that you pay about $13 a month and have access to the entire music library. Greg Jarboe: Where’s the money? There’s a few competitors that we compete with directly Jamie Steven: I’ll talk through some of the things that in the subscription space. Businesses like Napster, we’re doing. The easiest thing, and the first thing that previously businesses like Yahoo Music Unlimited or we’re kind of doing in the sense that we have a Web 2.0 MTV had a service called Urge. We’re No. 1 in the music strategy is generally – and I think this is the best thing subscription space. that anyone can do, and the easiest thing is around PR. I’m sure you’ll be happy to know that. We also have a business that’s available on the web, Rhapsody.com, which is an ad- supported model. The Greg Jarboe: This was not negotiated in advance. That idea there is that users can come to that website and was not a plug. listen to 25 songs per month for free on the website. Jamie Steven: The idea around that is establishing, if That could be any of the songs in our five million song you have a consumer business or a business product, library. As soon as you hit that 25-song limit, you need whatever the business, it makes sense for the business to subscribe to continue listening to music. The idea is to have a blog. In that sense. we have a blog where we that we serve ads on that site as a means to make money talk about the product, the service, as well as new music for those users who don’t end up up-selling into our full that’s coming up. That’s a really easy way for people to subscription service. In a sense, we’re that hybrid model get interested in your product through your blog. between both of those services. The other PR things that we talk about are establishing For us, Web 2.0 is a key component of our strategy, a presence, if appropriate, on some of these Web 2.0 but it’s not one of those things that we’re seeing the sites. Those are the Facebooks, the YouTubes, the Flickrs. immediate benefits of. I think as this discussion goes on You’ll see a lot of businesses recently have photos of I’ll talk about some of the things that we’re doing and, employee events, or customer meet-ups, those sort of really, what our objectives are from those initiatives, things. That’s a really easy way, an inexpensive way, for and I think some of the things that I think are things you to get out on those networks and just build some that businesses can do in the short term that are easy guerilla marketing for your product. to do, that you can see immediate benefit from. The second thing is to add customer interaction. The Oz Sultan: I’m Oz Sultan. I was actually with The way that we’ve done that on our site is allow users to Economist magazine and The Economist Group up until kind of engage with our site. If you’re a content site, probably about three weeks ago. I just jumped over a news site, the easiest way to do that is allow people

Web 2.0 Strategies for Acquisition & Retention

to comment on your articles and on your stories and Greg Jarboe: Oz, have you been able to make the cash on your blog. For us, it’s the ability to allow users to register ring? create playlists on our website. So by allowing them Oz Sultan: Well, it’s kind of interesting because it comes to engage, create a playlist, and share it with their from the perspective of branding to extensibility to what friends and their family, we’re, in a sense, increasing you’re doing with it. At The Economist, we were actually the awareness of our product with the network of that able to quickly kind of monetize on this, leveraging the user. Those are really easy things. debate series. If you go to economist.com/debate you’ll Now, do those directly tie to our bottom line? Not really, see a series that we put up. It’s Leveraging the Web but they’re really inexpensive ways for us to kind of 2.0 Technology. It’s very simplistic in terms of doing expand our awareness with the Internet user. so, allowing for full feedback, allowing for commentary as well as debate on a variety of different topics. It’s The third thing that we kind of do is all about moderated. But that was immediately monetizable interoperability. This is making it so our product, our through sponsorships that were easily brought to service, our music service, has an open architecture. Oz bear based upon the fact that they wanted the brand described this to me last night as kind of stackability. association. He’ll talk a little bit more about that. In the sense that we do that for our service, we have developed a Facebook Some of the questions that you kind of have to ask application that we launched in the fall. What that does yourself are: What am I trying to do? What am I trying is allow you to play music on Facebook. Now there’s a to combat here? Is it a brand erosion problem? Or maybe lot of sites that do that. There’s a lot of applications on is it a subscription erosion problem over the course of Facebook that do that. The key differentiator with our time? When you have ad pages that are being depleted Facebook application is that you can play full-length on the print side, and the question is how do I put songs. a strategy together online that’s going to make sense to extend this future forward, to either have those ad On my profile, if I were to show you – I guarantee you pages, or to put something in place where it’s actually don’t want to see my profile. If you did though, what a meaningful ad strategy, vis-à-vis, everything from you would see is songs and artists that I like and the banners to video banners that are popping up into the ability to be able to click a song and hear that entire market today. song in full length, free of charge. That is the feature that we add to Facebook. Again, it uses that same From the Facebook side of things, you have to consider: 25-song functionality. What we’ve done, in essence, Are you leveraging the existing client base that you in building that Facebook application, is write the have right now. What we were able to do was put software, the code, to allow many different people to something in place that allowed a very simple Facebook put our application on their website very easily. RSS widget tied to a Facebook fan page to build our fan group from somewhere around 2,000 users to about This is an expensive thing for us to do, to open it up and 10,000 users in a two- month period. have it work that way. In the sense that we’re enabling ourselves to allow a blogger, someone who has a music It’s significant in terms of what you can garner from a blog in New York City, to write about an artist and then user base that’s predominantly millennial, also Gen X, be able to put that song, or that artist, on their blog and then trickling into the Boom space inside of a lot and be able to play it. And the sense that we get is of these social networks. The other thing that you kind that we get our logo on that page, we get the ability to of have to look at is, historically, over the course of get in front of that user, and to be able to eventually the past couple of years, what technologies have really hopefully up-sell them into a subscription. worked for your organization and what’s the adaptability inside of your organization to do so. In a lot of cases, I’ll talk a little bit later about some of the other you can use these spaces to build large constituencies. partnerships we have, but that’s our primary objective. But, the question at the end of the day then becomes, I think the big goal there is just not monetizing it specifically for your organization, how that best fits directly, but brand awareness, building the traffic to with what your ad strategy is, or realistically, what you our website, and selling the ad revenue. For us, it’s want to do inside of a social community that you now kind of a long-term strategy as opposed to a short-term have a complete platform for. strategy.

Web 2.0 Strategies for Acquisition & Retention

Greg Jarboe: OK, we’re going to try to be practical. us business, we give them a commission. The don’t I It’s a little hard when you’re up against the landing would recommend is ensure that if you do look into one page clinic where things have been tested and you of these more expensive projects that requires a big can say, “Move this here, and turn it gray and magic integration, that you know that there’s a quantifiable happens.” So, can you share with the audience one ‘do’ audience that will actually use it. and one ‘don’t’ that they can take back to the office In the case of Facebook, in our first application we may tomorrow and be more successful, or be less likely to have missed that audience. In speaking with Oz, there’s have something blow up in their face? other sites, other new platforms that have many new Jamie Steven: That’s difficult. Like I said, I think the opportunities that you could be a first mover on if you number one thing that you can do around a Web 2.0 made the investment now. strategy is the simple PR-related type work, where you’re Greg Jarboe: Oz, a do and a don’t. getting your content out on these sites that allow you to syndicate and publish your content for free. A blog is Oz Sultan: Well, actually an immediate do is look at a great way to do that. the technology and kind of figure out culturally what’s going to work for you. Your company may want to put a If you have a consumer product blog – about the Flickr stream up. You may want to start a Twitter account development process of building that product. If you where people are, as they call twitting, or watching have a media site, obviously, you probably already your tweets, over the course of time and finding out have several blogs. I think that’s the easiest and least what executives in your companies are involved in. You expensive way to generate more interest and more may also, at the same time, want to look at Facebook traffic to your site. from the perspective that you can do a five-figure to As far as don’t, I think you need to be cognizant of the seven-figure application. – I’ll tell you kind of one of the mistakes that we’ve kind Kind of tying to that, we’ve got partners that I’ve of discovered in building a Facebook application was worked with in the industry pretty heavily, which is that Paul Allen gave a really interesting speech about where I jumped from going from the product side with how much success they’ve had from their Facebook The Economist to consulting side. There’s retention application. For us, we haven’t seen as much success. strategies that are very much tied around a rewards We haven’t seen a lot of users using our application. program in Facebook that are very successful in terms A few reasons for that. One is that we kind of got in of garnering millions of consumers around a certain the game a little late. We launched last fall when there concept, or a certain application. In Style and People were many other music applications on Facebook. To an magazine have been pretty successful with this. extent, we think, and we know that ours is better to an A lot of the don’ts, I think, I have to advocate the same extent, but at the same time it’s difficult because there’s way my peer here is saying. There’s a lot of perspective already that huge user base for these other applications. to throw money at a problem that you’re not quite aware We made a very large, six-figure investment to build this as to what it is. I think a bit of forethought goes a long application and we haven’t seen any ROI on that. way. Just because people are on Facebook, and just In the sense that we have some users using that, and because people are on MySpace, or have a Pageflakes we’re building some mindshare there, we haven’t seen account, or are involved in a variety of other white the ROI. We’ve had to look at that and actually say, “All label social media applications or platforms doesn’t right, who is doing well in music on Facebook?” What necessarily mean that you should just take the jump we’ve done there is we’ve actually made a partnership right now. It has to become kind of a cogent strategy with one of the most successful applications on tied part and parcel to what your advertising strategy is Facebook. I’m not allowed to, unfortunately, name who and, perhaps, what your marketing strategy is. that is yet, but what we’re doing there is we’ve got Greg Jarboe: I’ve heard some names mentioned, and I a Facebook application that has 20 million users, and haven’t heard some names mentioned. Let’s go through we’re going to be co-branded and basically powering the good, the bad, and the ugly in social media. There that application. are some trends, or sites, or whatever that get all the There’s a cost to that to us, and what we’re doing is buzz and don’t seem to generate bupkus for results. we’re basically doing a revenue share. As they send So talk to me about MySpace versus Facebook versus

Web 2.0 Strategies for Acquisition & Retention

BiBo. Talk to me about Wikipedia. Talk to me about Sort of in that same vein, as well, is what’s happening Flickr and Photobucket and YouTube, and talk to me inside of social media. Social media can mean a myriad about the various flavors of Second Life, etc. What can of different things. You could be working with someone you warn people against? Like don’t go there. It’s too like SendThis, and you could be putting a button or crowded … What ones do you think are the under- widget technology on your site just to syndicate leveraged opportunities? content or to get it inside of every single social media space you want. You could be building your own private Oz Sultan: Sure. It’s kind of funny you ask that because white label brand that’s associated with whatever brand I just did the Virtual Worlds panel over at AlwaysOn a identification that you want online. Or you could take couple months ago. The perspective is kind of like this. the Facebook strategy. You could slice it three ways. You could look at low- impact Web 2.0 technologies, the Twitters, the Flickrs One of the lessons learned from that is to look at why of the world. This is really where you’ve got a platform people are friends with Target and not friends with Wal- technology that’s out there. It’s something that you Mart. It goes back to understanding the constituency can play with. It’s something that people inside of base. Facebook is largely millennial, is largely Gen your company can leverage. It’s really either extending X. You’ve now, only more recently, seen an uptake in your brand or extending your visibility inside of the Boomers joining onto Facebook. You also have that community. adaptation curve where I think certain people in certain companies are probably a little less apt to jump into the It’s making you sort of that tech superstar. That’s what market, where you’ve seen the Friendsters die, and the a lot of these things are oriented towards. Especially MySpace is sort of waning, or becoming sort of music- the Photobuckets and the Flickrs of the world. You’re, in specific. largesse, putting the tools in the hands of the populace to take photos and to take other content, or media Again, it’s aligning the brand with perhaps what your content, and put it in a singular place. When I was at goals are inside of there. It’s also understanding the Sapian, we kind of did the same thing, which didn’t fact that not just are you garnering a base, you have a fully materialize, but it was leveraging YouTube to kind big platform to leverage here. of push out a video perspective on where we wanted Without going very, very long into the virtual worlds, to go. for some companies the virtual worlds have worked. Kind of going from there, the whole social media CFO.com, who’s a portion of The Economist Group, has space has become kind of quizzical for certain people. an implementation in Second Life. There’s a lot of big You could sort of demystify it this way. Consider the companies in the music space that are inside of Second fact that, on the very most basic level, you have the Life as well. Working with Habbo Hotel, looking at things concept of an enterprise mash-up, which is all right, I like MapleStory, consider the fact that you’re getting a have numismatical data. I have some statistical data, user demographic here that is predominantly female, perhaps. I have some geographical information related which you never had before inside of gaming. There’s to accounts that I’m working on. There’s perhaps other a big article in Fortune this month, even just touching information that I might want to see. base on that. But, if you have a complex product, and you have something that you’d like to instill inside of Up until recently, you had to buy very expensive gaming, the virtual worlds work for you. technology to render all of these things so you have a visual. Nowadays, what you can do is you can – I mean If you’re also interested in advertising in a manner of it’s as simple as what’s being done with Google Maps in fashion that would work with interactive games, that New York. People are saying, “All right, well I’d like to could work as well. You kind of have to work at the go to a wine bar. Why don’t I just pull up a list of wine virtual worlds, really, in their infancy right now as pretty bars.” What I’ll do is I’ll do an overlay over a Google much kind of a gaming platform. map, so now you’ve got a valuable piece of information Jamie Steven: I think for us, as far as looking at rendered in a way that it’s digestible for pretty much these different platforms, it’s really two things. It’s anybody. You have the three dimensional functionality the audience that’s using that platform. Oz described of just kind of diving in, pulling back, inside of an who’s using Second Life and who’s using Facebook. As interface that works for you that’s comfortable. It’s not he described, the Facebook audience is sort of that far too advanced for people. millennial, Gen Y, Gen X crowd for the most part. Actually

Web 2.0 Strategies for Acquisition & Retention for us, our music service, that isn’t really our normal people that are very much connected together, and demographic. Our normal demographic is everyone in you’ve got the influencers and the alpha dogs in the this room. This is generally the group that purchases pack, or the leaders of every single group syndicating our music subscription service because they have less out to their groups across most of these social networks time, they have less interest in going to the effort to as to what to do, where to go, what’s the new hot thing. purchasing music. Between Facebook, MySpace, and LinkedIn. I pretty much know every single event that’s going on in New The second thing is that that audience doesn’t really York, or any other city I might travel to at any point in purchase music, the younger kids, the kids in their time. For me. that’s valuable. early twenties who are in college now. They don’t really – they’re not used to purchasing music. They’re used to In addition, there’s brand perspectives, or there’s downloading it for free. So for us, we see an investment potential product purchases that I may need to make in one of those platforms as looking at who’s the over the course of the day. That’s also valuable. So audience that’s using that platform? Who’s surfing that positioning yourself, I think, inside of the lifestyle website? which is really emerging from this is one way of looking at it, and really allowing yourself to sell it internally. We see it as an investment of getting mindshare with But again, it just kind of goes back to the original point those users. We know that a lot of those users are where if technology is a big issue for you now, that may not going to end up paying for a subscription for our be an uphill road to climb. service. We do know that if we build a compelling free product for them that they will come to our website, Jamie Steven: Yeah, I think that’s a very salient and they will surf our website, and we’ll have very good point about the technology hurdles. I think in some advertising that we can run on that site because it’s organizations if you’re in marketing and you’re pitching a very sought-after group to advertise to. For certain to management this idea of getting involved in Web 2.0 audiences, it’s just an advertising play for us. or social marketing, you’re talking to someone who’s never even been to one of these websites, and they just But, without having mindshare with that audience in don’t get it. five or ten years from now, our service might not be around because we don’t have that audience to be in So I think a valuable tool is finding a case study, if front of. So I think it’s really about identifying the possible, that shows an example of a business. If there audience of these different services and products, and isn’t one that exists you can certainly do some market looking at an investment that makes sense to get in research and see, in the case of Facebook we were able front of that audience. to find applications that are generating a lot of cash doing music on Facebook. But again, they were early Greg Jarboe: OK, one last question and then we’re adopters. We were able to use that as a justification. going to go to questions from the audience. There was a survey taken earlier this year by Ad Media Partners, and I think it’s also just inherent in our business strategy they interviewed media company executives, and 68% to – our goal to be kind of the dial tone of music on said they thought social media was over-hyped. the Internet, so that if you’re on Yahoo, which we have a partnership with, you’ll hear our music. If you’re on So if you’re trying to build acceptance within an any of the MTV sites, you’ll see our music. If you’re organization for a social media project and the boss on Facebook or any of these other social media sites, thinks this is over-hyped, how do you make your case? you’re going to see our music. I think the challenge of How do you explain to somebody it’s worth testing even the businesses that don’t have that as a core business if we can’t demonstrate ROI yet? strategy, it’s using case studies to say, “This business Oz Sultan: That’s kind of an interesting question is similar to us. They’ve been doing this. They’ve been because there’s a lot of companies that still don’t have able to become very successful. They have ten million fully viable intranets. This is 2008. In certain cases, if users on this network, or they’ve been able to justify technology has been a challenge for your organization, this traffic.” you may have a challenge in justifying anything around The point I would make is if you can’t find a case study Web 2.0 or even an investment in Web 2.0. that’s relevant, then it maybe isn’t probably a good I think one of the biggest reasons to say do it is looking investment for your business to make. I think there’s at the fact that you’ve now got a global-user base of a lot of cases where that’s the case, where there isn’t a

Web 2.0 Strategies for Acquisition & Retention

feasible investment to be made. I think it just requires at some of these other companies, they’re talking about prudence to investigate the opportunity and see if things they’re going to be doing six months from now there’s something there. on their blogs. In a sense, there’s that whole risk/reward versus letting the public know about your marketing Greg Jarboe: Let’s go to questions in the audience. strategy. That generates interest. People are interested This is supposedly a Web 2.0 feature. It’s interactive. in knowing what you’re going to be doing in six months. Wow, cool. That’s like Q&A. We’ve been doing that for You have to kind of balance what you release versus years, right? Here. Just upgrade your questions to an what you kind of keep secret. interactive experience and raise your hand if you’ve got something. I think the more interesting and more provocative the content you put on the blog, the more readership you’re Participant: Two comments, if you will, and I’d be going to get. The more interest you’re going to get in your curious if the panel could respond. I’m a believer in product. I think that’s why you see certain companies social media and Web 2.0. I’m a student of it, if you just moving completely towards the transparency edge, will, so I’m by no means an expert. But my sense is because they want to build an audience that is interested that there are two key challenges here. One is related to in their product. I think that’s the - it’s a really difficult application. When I hear people say, “You should have a line, though, is where you go on that. blog,” as if kind of just leveraging that technology may do things. It just seems like it’s maybe a solution looking Oz Sultan: This is kind of a funny question because for a problem. So there’s that disconnect between maybe this is half the reason I went from The Economist back the technology and a viable application. into consulting. A lot of people are just – they need an explanation. The explanation has to make sense as The second thing is when I read all these articles, you far as how does this apply to my business. With blogs, see all these panels at conferences on Web 2.0, and you raise an interesting point. The whole legal, or searching for the Holy Grail, my sense is that 90% of disclosure, aspect of this. most adults still don’t know what this is. They go to a website and they see a Flickr button and they have no I mean one of the big questions you have to ask yourself is clue what would even happen if they clicked on that let’s look at your corporate presence and your corporate thing. visibility, right? Do you have a corporate presence right now that really kind of allows for the engaging of the Is a key part of this also just education? Just adoption, consumer populace, and is that something the consumer if you will? Somebody north of 25 years old even getting populace would really want from your brand, or whoever what this is? Again, the application question, and then you are? just how do we get more people to know what this is? The second thing to look at is blogs are the tip of the Jamie Steven: Sure. I think I can address the application iceberg. It’s really easy to buy blog software and to put question. In the sense, do you mean the application of it there. The flip side is – the other end of the panel, implementing a blog strategy or do you mean like the how are you going to SEO that so it’s valuable, and at software application? the same that people can find it? The things that are Participant: Wherever you use this. kind of quick wins, or can be made into quick wins, are social overlays, like I mentioned before, or looking to Jamie Steven: Certainly. I think the difficult thing with enterprise mash-ups, or looking to leveraging of the blogging in most organizations is your CEO or someone technology in a manner and fashion that’s going to else, your legal department, will say, “We don’t want allow for the consumer base to more easily access what to write about that. We don’t want to write about our you have to offer. Now whether that’s content, whether product strategy on the web.” If that’s the case, there’s that’s product, whether that’s a brand, it really doesn’t other things you can write about. You can write about necessarily matter. At the end of the day, it has to be customer successes with your product. You can write tied back to at least either some business goals, some about – if you’re a content site, you can write about PR goal, or some marketing goal. new content on your site. It doesn’t always have to be your product development cycle. Greg Jarboe: Yeah, let me just get one other sense of the audience before I go into my soapbox speech. How I sense that you see a lot of these new businesses are many people here work at media companies? Yeah, OK. all about transparency. If you look at Google, you look So this isn’t going to sound foreign to you, but we have

Web 2.0 Strategies for Acquisition & Retention other clients who don’t think of themselves as media they are now putting their television shows on free companies. They think of themselves as universities, or for the web. Some of them are even doing it without they think of themselves as airline companies, or fill in advertising. They’re doing that as a means to get you the blank. But, one of the things that’s happened is, interested in the show so that when it shows up on they’ve become media companies. iTunes, or some other media site, or video product, or video service, you can purchase it there, and that you When you create a corporate blog, you’ve just published like the show and you’re willing to pay for it. content on the web. You’re a publisher. And some funny things happen along the way. You start getting caught I think you’ve just got to consider what your copyrights up in the well, how do I build an audience? It’s like, are, and what your product, and what your content is, wow, publishing people have been dealing with that and consider giving some of it away as a means to get issue for years, and so one of the things that you more interest in your product. discover is if you don’t have credibility, people don’t Oz Sultan: The last thing I want to say is that – take the come back and read you again and again, and you have idiom of Robert Scoville. I mean, consider the fact that all the kind of how do you build an audience, how do what are you doing with this corporate blog but, at the you retain an audience issues around your blog that you same token, this could become very, very big and that do around your website. employee could potentially leave your company, which One of the fundamentals to understand is if your lawyers means you’ve now built into an asset and you’ve built are stopping your reporters from publishing stories, marketing to an asset, and that asset has departed. OK, that’s cool. There’s a process involved. More often So, retention from two perspectives. Retention from than not, there are some general guidelines that are set building the media perspective, and now you’re creating about when is a story going to be controversial enough a personality and then retaining that personality over that legal needs to review it, because excuse me, we’ve the course of time. got deadlines to meet. The blogging process is catching up to that kind of thing, and more often than not, your Greg Jarboe: Other questions? Yes. bloggers are best served to publish first and revise later if they have to. But if you set some guidelines ahead of Participant: I had a question about ecommerce and time, you can be as successful blogging as you can be whether you guys, anyone on the panel, sees any successful in any other kind of publishing endeavor. indications of ecommerce starting to come into Web 2.0, affiliate programs and such. Oz, I guess with Jamie Steven: I think one other thing just occurred your experience with the EIU, I guess as things like to me is that one thing I notice is happening, and has OpenSocial bring platforms, LinkedIn and SalesForce been happening for quite some time is the liberalization to the B-to-B world, do you see anything emerging, of copyright. We all have content that is valuable to us any examples, where transactional purchases may be that we’re used to protecting, and only letting certain happening through some of these social networks? people see it and if you purchase it you can see the content. Oz Sultan: I’ll tell you, one of the quick hits with SalesForce and OpenSocial is the fact in SalesForce I think kind of what has been happening is you’ve seen a that every user only can store about 100 MB worth lot of media companies giving away some or all of their of documents, and if you have a sales force, and as content as a means to build traffic to their websites. For everyone here, I think, knows, you end up with three us, that’s giving away music on the Internet and only proposals, it’s well over 100 MB. seeing marginal returns from that investment. The applicability of using Google Apps and Google Docs I think a key part of kind of embracing this is making the and plugging that into SalesForce is really hugely useful decision, OK, we’re going to take some of our content, for a tremendous amount of people because you’re going we’re going to put it out there for free because we want to have applicability to get to the content. people to be reading it and getting it, and that’s the opportunity we have to get people into our subscription In terms of monetizing for ecommerce, there’s some is by this free content that we have that’s good content nascent ways that it’s been done thus far. Typically that normally we would protect. what it’s doing is, it’s leveraging a consumer – it’s not the Beacon stuff. What Facebook had tried with Beacon You see a lot of that on a lot of the television networks; was kind of – if not everyone here is familiar with that

Web 2.0 Strategies for Acquisition & Retention

it was – if your friend buys a ticket for Iron Man and your credit card within the Facebook application, so it’s Fandango, it’s going to say, “Hey, my friend bought a a cohesive experience. We don’t want to take them to ticket for Iron Man and Fandango.” The thought process another website to do that. was maybe that would incent you to buy a ticket for Greg Jarboe: Yeah, and I think there’s a real danger Iron Man. It becomes actually more comical when it here. Let me use a historic metaphor. I disclosed last gets into consumable household products. night at dinner I’m a history major, so pardon me for the That sort of aside, you have to remember something. little digression, but it will come back to the topic. With these social networks, what you’re doing, and this There was another new technology that was really is a completely different strategy, is you are building cool, and people weren’t quite sure what to do with it, a marketplace and you are building a community of but it emerged during World War I. Right after World people who may be interested around what you have War I, having demonstrated its usefulness, a number to offer. Translating that to dollars is relatively – it of different countries decided that they were going can be done as simply as what you do right now with to invest in this new technology. It was called the discounting programs or coupons, or online offers, telephone. or that sort of thing. But more specifically over the course of my prior life to this, I used to run fye.com A lot of other countries, actually, they had their post for Transworld Entertainment, so I’m pretty heavy on office suddenly become the new agency that was going the music side with this guy here. Kind of look at what to implement this new telephone technology. In Russia, are you trying to sell? What are the retail margins for they decided to do something different. They decided, that? Really, where do you want to position this inside “We’re going to invest in a very different technology. of these social spaces? There’s a lot of really easy and We want to invest in the loud speaker because we don’t catchy ways to do that. Retention programs are a great want people talking to each other.” way to do that. In addition to which, building simple, catchy applications. I think one of the things we have to watch out for in this Web 2.0 world is we still have bosses who are much Jamie Steven: So I think I’ll try and address the part as more comfortable talking in loud speakers. I want to far as the implementation of ecommerce within these broadcast my message. I want to turn everybody’s mind platforms. I think from a Web perspective the best into mush, and then I want them to buy, in a Pavlovian strategy that we’re going to try and adopt, and one way, my product, even if it’s schlock. OK, well that’s that – I worked for a company that had a SalesForce an objective. If you work for them you know who they application in the past. The idea is if you have an are. application let’s say on SalesForce that adds additional capability on top of SalesForce, and you make it look Look at Web 2.0 as a different cycle, where if you’re like SalesForce – that’s the whole idea of a SalesForce getting input from your customers, or from your application. You want to embed the purchase experience prospects, the other option, if you reverse the flow, in that same application. is for you to actually change your product based on customer input. That may drive more sales than just So, the idea is if I have a document storage tool within trying to push, push, push the same old schlock out the SalesForce that I’ve built, there will be up-sells that door again. say, “Upgrade to the full premium subscription,” or “Upgrade to the pro subscription.” If you click that, If that is your benefit to Web 2.0, it may explain why the idea is have your developers make the ecommerce people haven’t seen it yet, because they’re still pushing experience look like SalesForce. The worst thing you can on a piece of string when maybe the new success for do is pop a new browser window that looks like your them is pulling. corporate site, that tells you to buy. Oz Sultan: Can I actually add two cents on that? What The best sites that have done SalesForce applications you all may want to take a look at is kluster.com. It’s are the ones who build it into the application and K-L-U-S-T-E-R. They’d come out of the TED conference, just asked for the credit card. You click go and the and it’s basically similar to what you’re saying. They put application is turned on. Same thing with Facebook. together a collaboration technology and commoditized We want to make it so if you want to subscribe to our it inside of a company, inside of the conference, and service, eventually you want to make it so that we take spun it out, got a little bit of capital and launched it.

Web 2.0 Strategies for Acquisition & Retention

The whole idea here is that your user base is not just One of the things that you can think about is that your constituency. These are the people that extend this is not just your consumer base, but this is your your brand, and build your product, and tell you what feedback loop, and this is a large group by which you your product should be. What Mattel originally did was can continue to improve your product, but also at the they sat down with tween girls, because they couldn’t same time remember, as the population shifts in this figure out a product that would compete against Bratz country, the millennials are going to become 30 and very successfully. They came out with a new product, 40 years old. Their tastes are really going to affect and they took it to market inside of six months. how they’re going to consume products now, and what products they don’t consume in the future. Web 2.0 Strategies for Acquisition & Retention

Moderated by: Greg Jarboe, President & Co-Founder Web 2.0 Strategies for Acquisition & Retention SEO-PR Jamie Steven, Sr. Marketing Manager, Rhapsody Ecommerce MarketingModerated by: Greg Jarboe, President & Co-Founder RealNetworks,SEO-PR Inc. OzJamie Sultan, Steven, Consultant Sr. Marketing Manager, Rhapsody Ecommerce Marketing MTheore data oEconomistn this topic avRealNetworks,ailable from:: Inc. Tuesday, May 13, 2008 Oz Sultan, Consultant

More data on this topic avTheailable f roEconomistm:: Tuesday, May 13, 2008

Credits/Thank You

Greg Jarboe, SEO-PR 978-549-9537Credits/Thank You [email protected] Greg Jarboe, SEO-PR 978-549-9537 Jamie Steven, RealNetworks, Inc. [email protected] 206-892-6401 [email protected] Jamie Steven, RealNetworks, Inc.

More data on this topic 206-892-6401 available from:: Oz Sultan, The Economist [email protected] 646-593-7250

More data on this topic [email protected] available from:: Oz Sultan, The Economist [email protected] 646-593-7250 2 [email protected]

Moving From Paper to Online: How ThomasNet Reinvented Itself After 100 Years

Session Description mail. Hear about the complete transition process Given a mandate to cease printing of a subscription involving marketing, sales and editorial functions, newsletter and deliver it electronically, the Editorial as well as challenges and successes associated with Eye created a microsite to serve as a subscribers-only motivating online-adverse subscribers to become active newsstand and to market to visitors in lieu of direct consumers of digital content.

PRESENTATION We were founded in 1898, and we’re headquartered here in New York. In fact, we’re on Eighth Avenue between MODERATOR: OK. We’re going to have to move on now. 33rd and 34th, and we’ve been there for 110 years. You Our next presenter – actually if you’re looking at your might say that – some people call the company a little guidebook, the folks from the Editorial Eye couldn’t make bit stodgy. We once moved across the street about 50 it. Unfortunately they’re not going to be here, but we years ago and came back. That was about it. found some folks who can step up and take their place. The Editorial Eye was going to talk about transitioning We’re a global information provider. We have – our from a print product to a purely online product. division of Thomas Publishing is ThomasNet. That’s where Jerome and I are from. That’s our online buying So, what we have today is sort of along the same guide, or destination site. Thomas Publishing also has a lines. Linda Rigano and Jerome Shaver from ThomasNet number of different global properties, which have both are going to talk to us about their process, and what online, as well as print properties. For example, in India they’ve learned about making that transition from print and in Brazil we have very healthy print directories. to online. Those directories are actually sold. Some of them are a Linda Rigano: Thank you. We were called at the last controlled circulation, some of them are sold. We have minute. Eric called up and he said, “Look, do you a variety of different business models. think you can come down and share your story with We also have the magazine group. That’s a controlled ThomasNet?” I was just about to board a plane for circulation product. We’ve been online since 1995. Miami for a national sales conference. I said, “Oh, Our focus is 100% on the B-to-B marketplace. When God.” Then he said, “We’d really appreciate it.” I said, I say B-to-B, I’m talking about the industrial market, “You know what? We’re happy to.” We’re a member of manufacturers. Typically our sweet spot is small to MarketingSherpa – or a subscriber – and think very mid-size distributors as well as custom providers, so highly of the organization. fabricators, job shops, machine shops. There’s about a One of the things that Eric, at MarketingSherpa, had million of those companies that are out there in the asked us to talk about was our history, really to share U.S. and Canada. That’s where our focus is. the story of ThomasNet and how we have gone from Our focus today for Thomas is bringing industrial buyers a paper product, a paper subscription product, to an together with sellers, but it’s always been that. It has online product. That might be different from where always been that. It’s interesting, when I was hearing you’re all coming from today, but we’ve learned some the other speakers – and we’re going to talk about some very hard lessons along the road and we thought we things that we’re doing as well with Web 2.0. Our focus would share them with you. has always been about listening to the user. That’s Jerome is going to dive into some of our business something that I didn’t hear them say, but I know that’s models and what we’re doing. I’m going to kick it off kind of a given. by sharing a little bit about the history of Thomas. How Everything that we do at Thomas and ThomasNet, many people were familiar with Thomas Register of Thomas Publishing, is focused on what does our user American Manufacturers? The big green books? Good, want. We do a tremendous amount of research, we do good. Well, let me share a little bit about who we a tremendous amount of looking into what our buyers are today. We come from that. ThomasNet is actually want for both paid products as well as controlled our online name. We’re part of Thomas Publishing. circulation.

Moving From Paper to Online: How ThomasNet Reinvented Itself After 100 Years

Just a little bit of history. We started back in 1898. free, and then we were selling it in print. Then we were There was a Mr. Thomas. It’s still family owned and migrating our advertisers all at the same time. It was a operated. By the way, the original Thomas Register was pretty crazy time for Thomas. a black book, it wasn’t green. I once had a guy who What we found quickly was that we were driving traffic, called me about 10 years ago and he said, “What’s it but we were driving traffic into a black hole because the worth to you? I’ve got the original Thomas Register.” suppliers who were putting up websites were putting I said, “Well, what color is it?” He said, “It’s green.” I up the equivalent of black holes. We were putting out said, “Sorry pal, that’s a promotional print-up that we what we called brochureware. When you think about did.” If anybody comes across the first one, the black when you go into a website, the dynamic is that you’re one, we’ll start talking money. looking for product information. Our users were looking We evolved into the Thomas Register of American for product information, and they weren’t finding it. So Manufacturers throughout the industrial revolution. In we started to have clients who would get frustrated and our heyday, we were 34 volumes, so imagine that, 34 cancel. volumes of product and service information, company We took a step back as a company and said, “You know profile information, as well as catalogs. We were sitting what? Our world is changing so much.” I mean, the first very pretty for a number of years. The model was both thing was that we started to see, as we were going more paid circulation, as well as advertising based. The and more online, and our buyers wanted us to be online, majority of it was advertising based, but we did have why? Because they could get more product information paid circulation. We had a whole circulation group that online. That was the premise. What we found was that focused on selling it. Then we evolved online. our circulation was dropping. It was dropping to the I’ll tell you that when we first went online, we actually point where it was practically nothing. We knew all along first created CAD drawings before we went online that – we had figured that it would be about year 2000 by we used to distribute by CD. That was based – it was the time we killed the print. It turned out to be 2006. a partnership that we had with a company in Germany. It was actually Thomas Register’s 100th anniversary and We were one of the first companies that actually started we killed the print product. to do that. We would deliver them through a CD. We still had the print going way down. We still had the When we went online in 1995, directories – I don’t know. online usage going way up, but the buyers who were Are there any other directory companies out there? Not coming in were very dissatisfied … If you see our online too many. Actually, not one. One, one. What is your product here, and this is our newsroom, which I’ll talk company? OK, good. Directory companies happen to be about in a minute, what’s missing up here, because we perfect for online. It just happens to be the perfect didn’t have a chance to change this at the last minute, match. is that to really address the problem with the suppliers who didn’t have good websites, who didn’t have the When we first went online in 1995 we knew we had to. information that buyers wanted, we created an entire We were hearing it from our buyers, the people who Web solutions group for ThomasNet. So, we created a used our directories, the engineers, purchasing agents, group that develops advanced websites – and when I say people who were using our directory to find suppliers. advanced websites, I’m not talking about just a basic So when we went online we thought, “This is great.” website that little Johnny did in the basement. We’re We went online and we sold – we had to take all these talking about websites that can accept CAD drawings, advertisers – we had 20,000 clients who were advertising that have interactive features, that have all sorts of in the print directory, those lovely big Yellow Page ads, information in them, the things that buyers wanted, and we had to migrate them to online, as well. that they told us that they wanted. Our business model was strictly ranking by position. We also started to create catalogs, online catalogs, with The concept was the higher that you appear, the better or without ecommerce. I heard a question earlier about chance that you’ll get contacted, right? All was fine. ecommerce. In our world, today we’ve got probably That was great, except what happened about six months, – what would you say? About 5,000 catalogs online? a year into it is that we found that people would click Probably about that. About 5,000 of our clients have on it and we started to see a growth going online. Keep their online catalogs online today. Less than 5% of in mind we were still selling the print product, and them have ecommerce capability. That’s a measure of we were testing this marketplace. We were online for

Moving From Paper to Online: How ThomasNet Reinvented Itself After 100 Years

the market, our market, because we talk to our market. listen to what your buyers want by doing research – and Jerome’s going to delve into a lot of the research that If you have a lot of manufacturers, they may not sell we do because he heads up that whole area. direct. They may prefer not to have that. They may have other ways of getting it to the distributor directly, or they What we did was we talked to our users and said, “What want somebody they can, if they’re a custom supplier, do you want to do? How do you want to get your news?” you can’t do ecommerce because it’s something that’s We developed our newsroom based on that, and I’ll show got to be made. There needs to be an interaction. you that in a minute. Then the third part of this was the CAD drawings. We had Just some usage stats, OK? I’ll tell you, in our heyday the advanced websites, we had the catalogs, and then with the print, we had about, I’m going to say 300,000 we had CAD drawings, because in our marketplace if an copies of the 34 volumes out there in circulation. engineer is looking for information because they’ve got Those were the days when we talked about pass-along. a product that they’re developing, they may need a CAD Anybody remember that? In our heyday. Today, online, drawing that they can actually go up, download, and 40 million user sessions a year, over 67 million product insert into their part. That’s a very powerful thing for and service searches, and over 730,000 CAD drawings a supplier because it means that if you’re downloaded were downloaded. So we can be so much more to our and actually inserted into somebody’s spec, the chances customers online. Keep in mind, we have two sets of of you getting that order – that supplier of getting that customers, the buyers who come to us who want to order – is 8 out of 10. Very powerful for us. get that information, who are the active shoppers, or sources, and then the suppliers who want to reach them Today our business model is completely different. We’ve and sell to them. got our website, and our website was actually designed by our buyers. We must have had I don’t know how So, we talk about staying true to our business objectives. many renditions of websites since 1995. More than I At ThomasNet, again, the focus – and our president, care to think about. We started off probably with more Eileen Markowitz, will any time we bring anything to the Google look-alike, and then we ended up more of the table, whether it’s a new idea about anything at all, a blend because buyers told us that they wanted to whether it’s a blog that we’re posting for our newsletter, have the product search, the company search, the brand whether it’s an RSS feed that we want to set up in name search, but they also wanted to look by category. our newsroom, whether it’s anything new at all – the We had to blend the best of both worlds, and so we question that comes to mind is, “Do our buyers want it? came up with ThomasNet.com. Not the sexiest site in What are our users saying, and do they want it?” the world, but that’s not our goal. Our goal is to be When we talk about justifying to management, I would functional, and to be able to be used by the buyer. highly recommend … the best case for management is So, I’ll give you a couple of stats on us. We have to say, “Your users and your audience want this.” That’s about 600,000 companies that are listed. We have an what it’s about. It’s not build it and they will come. It’s editorial group in New York that actually goes through find out what they want and then build it, and make and monitors all of this. They’re all verified one way or sure that you’re continually testing it throughout. In another, either self-verified or through the company. our case, it’s connecting buyers with sellers. These are We have 70,000 product categories, product and service the two groups that we’re selling to. categories. Access to over 20 million CAD drawings. Our process looks like this when we talk about how we The CAD drawings are posted. Those are paid for by the operate, or our business model. Two revenue sources. client. Tens of thousands of product news stories. We The primary revenue source is the ranking, today, which have a product news tabloid. The online version of that we have positioned. People pay to be in a certain is our newsroom. category. Then by whether or not they have one or more What was interesting is that up front in the game, we of our content solutions. said to ourselves, “OK, well we’re going to take the Everything is free when it comes to accessing the site. product news tabloid and we’re just going to put it In the old days when we first started out … we actually online.” Well, you can’t do that. I would encourage all had registration on our website. We had a healthy usage of you not to do that, not to think about just migrating base, we thought. You really never know until you lift to online. That’s a big mistake. It’s all about reinventing the guard. We did research with our customers and we yourself. And what is it that your buyers want? If you

Moving From Paper to Online: How ThomasNet Reinvented Itself After 100 Years found out that they did not want to have registration, rooms with pads and a bunch of guys in suits. Now not for what we were offering. I know everybody’s in a we do online focus groups. We talk to our users. We different online area, but what we were offering at that can show them the site. We can give them tasks. We point they did not want to register for. They were very can say, “What do you think about this presentation? concerned about revealing their privacy. What are you thinking right now?” They’re in their own work environment. It’s a great way to really get some We turned around and bit the bullet, because as a media interaction from your users and to do some research company – now keep in mind, we’re ABC audited online, about what they think and how they interact with the as well. When we lifted that registration ban, we were product. Then and now, those are the different things concerned about what would happen. It was awesome. that we had done and we do now. Again, same thing All of a sudden the floodgates lifted and we saw traffic that we always did, just a little bit differently. that we never thought we could get. It was the right kind of traffic. It wasn’t the unknown or the people that Linda Rigano: Oh, and we’ll talk about the research. We we didn’t want to have come in there. It was the right actually got together with Google, because they happen kind of traffic. First we talk about understanding the to have been in the industrial space with us. For those buyers…. of you who – you obviously wouldn’t know this if you don’t know the industrial world. Does anybody know who Jerome Shaver: Sure. As Linda said, research drives the largest keyword buyer on Google is? Right. eBay is. all of our product development at Thomas. It’s core to Does anybody know who the largest industrial keyword everything we do. That cycle that she showed before buyer is on Google? ThomasNet. of user research, product development, measurement, testing, and improvement, all of those things have been We did get together with them and we did some research going on for decades at Thomas, and it’s allowed us to just to get a better understanding of the marketplace. evolve in such a way that we can continue to fulfill We just did an update on this. What we found was the core business objective that was up there, which is that when buyers are coming into our site, and they’re connecting buyers and sellers. looking for information, they get to a supplier’s website, they’re researching. They’re gathering information to One of the general themes of this case study that we make a purchasing decision. They’re looking to gather. wanted to convey is that it means change. Technology That’s going to tell us something later in terms of what changes, but if you keep your eyes on your core business are the things that we want to help our suppliers make objective, then you can survive through this fast- available online. changing world, through different technology, different competition sets. If you continue to fulfill the needs of They’re making purchases, but they’re gathering your users, you can survive and prosper along the way. information to make a purchase. So that purchase is not always going online, it’s going offline. We use the The types of research that we do are: We do a lot of same analogy, let’s say if you were going to buy a car surveys, a lot of research. We do focus groups and and you wanted to do research online. You’d gather the like. Here’s the types of questions that we often all the information, and you probably would start off ask. What are they doing? What are their likes? Their at a search engine, or you might go directly to Ford, dislikes? How do they access information? How do or BMW, or whoever you were going to go to, which they navigate? What types of things do they do on the is the equivalent of the company site, or you might Internet? What types of things do they do offline? Is go to Kelley Book, or you might go to Day Trade. You our potential to pool that offline interaction and to might go to different sites that service that market. The push it online? Things have changed, and things have idea is you’re gathering information to make a buying evolved obviously. decision. We were print for 100 years, and we did all of those When we looked at our marketplace, and we try and things. We did those same types of things, tried to put a persona on our buyer, the buyer for ThomasNet find those same types of insights. But as technology happens to be someone who is spending a good 25% grew, we identified a lot of opportunities to do things of their work week sourcing for products and services. differently. That’s a lot of what we’re talking about here That tells us a lot. That tells us that that person is today. not interested in having an experience when they In the past, we would do focus groups, smoke-filled get to a website. That person is not interested in a

Moving From Paper to Online: How ThomasNet Reinvented Itself After 100 Years

Flash intro. That person is not interested in the big so that someone couldn’t take your secret sauce, if you mission statement about the facility, which is – a lot want to call it that, would that work for you?” Yeah. of our market still is doing that. They’re still having the Then another issue was, “Well, my competitors are brochureware that’s up there. going to see it.” The same thing with product pricing. “I don’t want to put my pricing up online. My competitors What they’re interested in is getting in and getting are going to see it.” We’d say to them, “Listen, your the information they want to make a decision, because competitors are going to get that information whether they’ve got five more like them and they want to get you want it or not. It’s not going to be a big deal. If out of there to make their kid’s play at 5 p.m. That’s anything, post your retail pricing.” our marketplace, who we’re going to, who we’re trying to help. Our job is to help the suppliers reach them and As we started to develop this, this is what we were satisfy that need. So when we look at – this may be a looking at, and we were going back to our suppliers and little difficult to see online – but the key things that saying, “Hey guys and gals, you need to get your acts buyers are looking for is product descriptions. When we together here. We need to start looking at what we’re say product descriptions, we’ve done a much deeper putting on our website and what we’re making available dive on that since then. to your buyers, your prospective buyers.” We’re not talking about opening up a giant PDF. A lot of When we look at the research, and I just wanted to manufacturers, what they did in the early days was they – this is something I highly recommend, this matrix simply loaded up their print catalog, shot a PDF of it, approach, to everybody – when you do research on a and put it online. Well, there’s nothing more frustrating market, you always get what you hear, and then the to a buyer than opening up a PDF and having to jump translation is, “OK, well how does that translate to my down to page number 40. Certainly they’re not going to business model? What does that tell me in terms of how print it out. I could take action?” When we do research and we find that buyers are spending more time sourcing online. They’re looking for detailed product information that’s What’s the opportunity? Well, the opportunity means got functionality and navigation, that’s got the specs. that we need to increase the speed and the efficiency They’re looking for pricing, if it’s appropriate. They’re of the site. looking for CAD drawings. They’re looking for the nuts and the bolts. What we did was we did a cross on what When the buyer is saying sourcing online is not easy buyers are looking for and what suppliers are offering. when they’re looking for complex information, provide more company information involved in categories. If you can see on the colors. OK, so the yellow is what Difficulty accessing relevant suppliers. Detailed buyers expect to find on supplier’s websites, and the information is missing. Sites were difficult to navigate. green is what the suppliers are providing. When you take We’re still hearing a lot of that today. What do we need a look at this, look at that disconnect. You’re seeing a to do? We need to develop products and services that very large disconnect between what buyers are looking will help the buyers get this information. For Thomas, for and what suppliers want. that’s a business opportunity because that’s something Especially when it comes to – look at the CAD drawings. that we can sell. 58% of buyers want CAD drawings, but 13% of suppliers When we look at our business model from the old time, are offering them. As a company, we had to take a look the old years, to now, what a difference. Web solutions back, and I’ll use that as an example, and say, “Why is are a huge part of our revenue source, where in the old it that so few suppliers are offering this if it’s a big part days it was more about priority and position. So it’s more of their business?” about the Web solution offerings that we provide. As we started to peel the onion, we started to uncover Anonymity is critical. OK, privacy is key, but keep an the issues, which were a lot of suppliers saying, “You audit on the site. We’re ABC audited so that every month know what? I don’t want to put my CAD drawings online we get a detailed report on who was going in there. because within three hours we’re going to find 5,000 We give our advertisers reporting information, detailed knockoffs somewhere else, in another country.” reporting information, not only from the website, but We came back and said, ‘Well, if we could develop a from Web-Tracks, which Jerome’s going to talk about. way that we could post those drawings online and they Another one from the client-supplier side, knowing would just be sales drawings, not mechanical drawings,

Moving From Paper to Online: How ThomasNet Reinvented Itself After 100 Years key places where buyers are sourcing online. Well that within the construct of the print world. Now we can do translates to us to education … We have about 100 everything that our research had always told us in the people in New York, and we have about 300 independent past, or we had an inkling toward, but now we can fulfill reps who sell our products and services across the all the needs that we identified more recently within country. The big issue for us is getting in the door and the research that we’ve done more recently trying to fill educating them. the gap that Linda identified between what was being offered online by our advertisers, or our prospective We do workshops. In fact, that’s part of my job. We advertisers, and what we could build. go around the country and we do 90 minute to three- hour – we call them web solution workshops, or internet Then this comes into a lot of our different things. We do marketing workshops. It’s all about educating the have Web 2.0-esque type things. The blog is Web 2.0- marketplace so that they can see this as an urgency, ish, I guess. One of the things that we always stress, and hopefully this will turn into more sales for us. Well and Linda and I have done this presentation before, is not hopefully, it will turn into more sales for us, and you don’t build things just to build things. You build has. things because your users need it … You don’t just dive head first into something because it’s fun, or it’s cool. Websites fall short of the detailed navigation. Well, we This is business. We don’t have fun unless we have to, help them build websites. That’s what we do. We do right? that through our reps that are out there on the street knocking on doors day to day. Providing ROI and metrics Linda Rigano: Wait a second. … Again, it’s educating them through our sales force Jerome Shaver: We took everything we found in our and through communication. research, and we started to build a product. Users Jerome Shaver: As I said before, the main thrust of are searching, we have a problem with the amount of this presentation is about product development and information still, but we took the types of things – this about research-driven product development. We did is very difficult to see up here, but local is still key. research back in 1905. This is what the book looked like We have things like certifications. That didn’t exist 100 … This is what the advertisers bought. We did know years ago. We have product catalogs. We have different what people wanted, but it was a little bit different. types of navigation. The books were hard to catalog, It was through word of mouth, suggestions from our they were hard to index. You couldn’t look at data in users. We did surveys, I’m sure. It was eons ago for me. different ways. We have the ability to do so much more Even back then content was king. than we ever could. We have state certification-related We knew that local was important in manufacturing, stuff. That was only half of the equation. It was our obviously. Shipping costs are much less today, I’m sure, user side. than they were then, but they still were very important. We knew there was that need there, but there was also We knew about that. a gap in the advertiser’s side. We identified that the As the years progressed, the specialization in manufacturers of these products, the sellers of these manufacturing increased exponentially. There were a lot products, were not able to create the things online that more manufacturers then there ever were, and this is they needed to create online, even though people were what happened to us. We had these huge volumes of looking for them. There was a huge gap there about information. I think at a time we gave away a specialty what was being done and what could be done. bookshelf that actually came along with this … because Linda Rigano: Yeah, this is really our web solutions there were so many of them. It took us a lot to get to the … We’ve gone through a lot of pain over the years, place – because we were trying to fit that need, but we and a lot of learning curves. We’ve been humbled over were limited by print. Really, what’s great about online the years in terms of what we’ve put up, and how we’ve is that there’s no limitation, or there’s less limitations. experienced things. We’re lucky because we’ve had a The production costs are a little bit different. great management who’s stayed with it, and who stayed One of the great things about technology, it’s scalable in with the investment that it took to get to where we such a way that you can really meet your user’s needs in are today. There was a tremendous investment that was a way that we could never do in the past. People always involved here. needed detailed information, but we couldn’t provide it This is our core business today, from our advertisers. It’s

Moving From Paper to Online: How ThomasNet Reinvented Itself After 100 Years

developing those websites. It’s the online catalog so that the language of choice. We have a global site at Thomas somebody who’s got – picture a fastener manufacturer that’s available in nine different languages. We’ll work who’s got 800,000 different kinds of fasteners. Well, with a company and have a native translator set up they can have a catalog where it’s all in there and their pages in whatever language it is, and for whatever somebody can drill it down to the five that they need country they want to sell to. If it’s China we use within less than five seconds, and have visuals, and be simplified Chinese, not Mandarin. We’ll used simplified able to download and actually either make an order or Chinese, or we’ll do Italian, or French, or whatever it send in a request for a quotation. Those are the kinds of might be. Now it gives them the opportunity, and we’ve tools that we’re doing. positioned them on our global register, to be able to get business overseas. The CAD drawings: This is huge. To be able to say to a small guy, “Look, you can be on the same playing Jerome Shaver: OK, so this is a big part of what I do field as one of the large companies because you’ve got is measure everything. If you don’t measure it, did it this information and it’s going to be affordable.” The happen? That’s a question that you should always ask idea was for Thomas that if we could take it to scale, yourself. I think I was of the opinion at a point where it and our development to scale, we could keep the price did happen, but now after being in the business, since reasonable so that others could take advantage of it. my salary depends on it, I think it doesn’t happen. We just came back from our sales meeting where we had Score, determine – with what we do in our research, we one of our speakers say, “I’m a small guy. I’m a small do all this research and it’s generally market research, guy out in Washington Courthouse, Ohio, and I am out right? Where’s the gap? What can we create? Where there looking like GE online.” And they are. is everything coming into play? Once you build the product, you need to verify that market research actually Jerome Shaver: He said it was the great equalizer, I is translating into your product. Are you filling the need think is the phrase he used. that you set out to fill? Are you bringing value to the Linda Rigano: Exactly. Then our online newsroom. This advertisers that we’re trying to get money from? is the newsroom that was our product news tabloid. Ultimately, you need to measure – I’m speaking certainly Online, what do we have? We talked to our users. What online here. You need to measure if your research that do they want? They wanted to be able to get product manifested itself into the product is actually working. Is information, therefore we set up the RSS feeds, daily, it viable? Are your users using the product? The things weekly, monthly, product news alerts. that we do these days to validate whether our business We also have a newsletter and we have lots of objectives were filled, we do online surveys. It’s a great touchpoints with our buyers. We have a newsletter that medium for surveying online. goes out to 320,000 opt-in users every month. Every We do online focus groups. I mentioned some of these month. Twice a month. That is something where we’re things in the past. Web analytics, one of my specialties, constantly talking to them. and we were very heavily in Web analytics as the best We take the best of it, we post it in a blog online. The quantitative tool you can use online, in my opinion. blog is getting tremendous activity online. We’re finding What’s better information than how people are using that these engineers want to have a forum where they your product step by step, how they’re pathing through can talk to each other, so we make that available. We’re the product, what their reaction is to it. It’s a great learning from that as we go along so that we’ve now, means for identifying shortcomings in the product and since then, developed forums where people could start what’s successful. talking online. Here’s another old and new type of pre- and post- Again, it’s based on asking them first, “What is it that slide on the types of things that we use. Like I said, you’re looking for?” They’re not going to say, “Gee, I want surveying is big. Web analytics is – the time for Web a blog.” It’s being able to translate that information analytics has really come of age. It’s grown so much into something that you can put on there. in the last decade, and you can really do so much. Not just telling you what’s nice to have. Web analytics is Then of course, internationally, a lot of our companies becoming about repurposing the data back into your want to be able to sell overseas. Well, if you want to product, back into your marketing. It’s not just about sell overseas, you’ve got to have your information in marketing performance. It’s about marketing itself.

Moving From Paper to Online: How ThomasNet Reinvented Itself After 100 Years

That’s really where the analytics companies are moving We talk about search engine marketing. We have a whole these days, with data integration. We do internal group in New York that does that, obviously to manage analytics. We use WebTrends. I like the product. It’s the pay-per-click program, or SEO. We’re doing a whole nice. We can have it in-house and I can play with the variety of different things with partners in terms of data any way I want. We have offsite analytics, too. adding content. When we look at online, our future is in content. One of our problems was that our advertisers were small businesses, and they didn’t believe in the Internet. They As far as – and I tell this to our clients when we do our didn’t believe that people were using it. What we had to workshops. SEO is wonderful, but all the search engines do is, we had to give them some type of tracking tool so honor one thing. They all have one purpose, or one that we could prove ROI to them. That was a big step for goal, the gem players, which is to deliver a relevant us because online advertising to us is real, and it hits result to a user’s search. That means you’ve got to have our bottom line, and we can see it through transaction the content there. For ThomasNet, that means helping and ecom generally, but for our advertisers, as Linda our suppliers have the content, but it also means having said, a lot of transactions are happening offline so they the content ourselves, so we’ll do partnerships with don’t believe it. They don’t understand. It’s mushy. It’s organizations like ANSII Standards, or others who can not tangible to them. provide white papers and different information that’s relative to our industry. Again, it’s got to be relevant We built a Web-tracking solution ourselves, and we to the industry. implemented it on all our advertisers’ sites so we could go and say, “See, this is what you’re getting. This is Interactive videos, online video clips, we’re doing all the great people that are coming to your site. It’s the of that. You know something? There’s nothing more Boeing, Lockheed, and all of these giant manufacturing that frustrates me when I go to a conference and I companies, that business you’re getting now that you hear somebody say, “You should put video up on your weren’t getting before.” site. Put video up.” I’m a big believer in it, and I’m a big believer in a lot of the tools, the online tools, Linda Rigano: This is given free, by the way, to all of but they’ve got to have a place in the process. For us, our clients. Every client gets a complimentary tracking videos are pretty far into the process. When that buyer service. has made a decision, or they’re evaluating, and that Jerome Shaver: Right, it’s great for retention. great video is used to help evaluate it. In our business, I for retention for our advertisers. We still do the surveys. mean each of us have to evaluate our own audiences. We do eye-tracking studies on occasion to get people’s But, look at your audience. I can’t hammer that home general perception, where their eye’s going on the page. more from our perspective. That’s a little bit sophisticated, but the next step here Jerome Shaver: Right, and we use research in is promote and market. everything we do. I mean, we’re just touching on the Linda Rigano: Sure. Traditional – when we say promotion activities. I’m sure all of you here are heavily traditional it doesn’t mean that we’re not doing it interested in those things, but in terms of banner ads, anymore. Some people say that direct mail is making we’re doing behavioral marketing stuff because our a comeback. I don’t know. The fax blasts, all these audience is difficult to reach. They’re kind of niche. So, different things that we did in the past online, it has its we’re doing behavioral marketing stuff in terms of SEM. place. We talk about the email newsletters, having a lot We’re doing a huge amount of – a very large program, of customer contact points. We talk about the virtual we’re doing automated bidding based on conversions, trade shows, the online banner and tile ads. In our ultimately, on our site. We do heavy segmentation. newsletter, that’s a revenue model for us. It’s a revenue There’s all kinds of research that goes into just these generator. We actually sell banner ads, and tile ads, and promotional items. sponsorship opportunities, even on the RSS feed. When Same with SEO. What’s exposed to the search engine? the RSS feed comes over, we have a tech sponsorship, How much do you expose? Everything is driven by so it continues all the way through. So, somebody buys research there. We do it day in, day out. Promotion is a a certain category and however that’s disseminated to big part of what we do. If we don’t have an audience, the user, that sponsor is included in it, and that’s what we don’t have a business. we sell.

Moving From Paper to Online: How ThomasNet Reinvented Itself After 100 Years

Linda Rigano: We also have some fun, too. We did a We do a lot of multivariant testing with a company chopper campaign when we launched ThomasNet and we called Optimost. It’s a very good company. What it had the guys at – I don’t know how many people know allows you to do is to automate testing in a way that the guys on the Discovery Channel. What’s their name you could never do in A/B testing. It’s like A/B testing again? American Chopper? We actually commissioned on steroids. You can test every single element on the them to build a ThomasNet chopper, a green chopper, page, the copy, the calls to action, the formats, the and we did a whole promotional campaign around it, color of the text, all at the same time, and then you can leveraging everything online that we had, trade shows, isolate what works best out of all of those individual the whole bit. We ended up getting over 300,000 pieces. entries to this contest. One woman in Ohio won it, and Ultimately, what you get out of it is the best combination it turned out that she was just getting her motorcycle of every individual element with the best pass through, license. We did have some fun with that. if that’s your business objective. You can arrange it to Jerome Shaver: That brings us back to testing, and fit any business objective, but ours is generally pass- I know everyone just sat in a session about testing. through to the next page, click on advertiser information, I’m not going to go into very specific methodologies or something like that. We do that extensively. of testing, but it is a big part of our structure, of our We do typical A/B testing on larger types of things like cycle, our development cycle. If you don’t measure site redesign or something like that. We do more of an everything, you can’t really do the testing. We do testing A/B style, because sometimes multivariant doesn’t lend extensively on things like landing pages, promotional itself to massive change really. So we do typical A/B type of pages. We have a variety of other things like the testing as well. toolbar and some other products that we try to integrate into people’s workflow. We use testing on those types Linda Rigano: Why don’t we go through some of pages. examples. We use testing on every site page. You should think Jerome Shaver: Each one of these depends on what about your site as a landing page, because it is. If you’re you’re testing and what you’re trying to achieve. There’s doing SEO, every page on your site is a landing page. the right tool for the job if you need it. This is just an Not a lot of people understand that. Don’t ever believe example of multivariant testing. Each of the elements that people typed in exactly what you think they typed are all switched up. Everything is scrambled, and you in and got to that page, because that’s false. can test across these kind of different presentations over a million visits, over two million visits, over a long I mean people say, “Oh, Google’s great. It gets me period of time to optimize what the best combination where I want.” I don’t know what Google you’re using, of those elements are. because it doesn’t. You make these long – everyone’s searching with multiple terms these days, and Google’s This is a general slide about what we consider when taking you places that you don’t want to be. So it’s testing. It’s important to not compromise the user really important to take that into consideration and experience with traffic. Testing is great, but you don’t understand that you may have the information that want to harm your business, or harm your online property someone wants, but it might not be that page, because by testing, which can easily be done. You can’t just all of those search engines just really aren’t as good as throw something up and then have the search engines everyone believes they are. At least from what I hear. hit it and it’s totally different. It’s less content. You When you pin someone down and say, “Is it really that drop your rankings. You have to be really careful you good?” They say, “No, it’s not that good.” don’t impact traffic. Always ask what makes your users click. Always treat The brand perception. You don’t want to test logos, every one of your pages as a landing page, and test obviously. That just doesn’t really make any sense in them all. Some of our biggest pages, where we get our a multivariant fashion. Here, for example, we tested money, are – we have a million of them exposed to the this page which is a crucial page for us because all of search engines, so we have to test all of those pages. our advertiser information is on it. Any time someone We have to test everything we’ve got on the site. It clicks on that it’s value to our advertisers. So we tested becomes really difficult. These are the types of things one billion template permutations on this one test. I we do. think it was over the course of a month and a half

Moving From Paper to Online: How ThomasNet Reinvented Itself After 100 Years or something. That’s impossible in A/B. It just is. It’s totally impossible. What we did was we opti-performed the control by 16.2%, thereby increasing the value we have to our advertisers by 16.2% given that we report back activities that take place on the site. Then it comes back all full circle. As I said before, this is really how we managed – and I say managed to survive – because it’s not easy. It’s never easy. We’re under tremendous pressure, even now, with less barriers to entry. The competition is fierce. Our competitors are as large and moneyed as Google and Yahoo, and we’re getting nipped at our heels by these smaller guys with these smaller sites. These start-ups with three or four guys that – it just doesn’t cost as much to get into the space, so our competition is really fierce. What we have done over the last decade, and over the last 100 years, is continuously talk to our users, identify market gaps, try to fill those gaps, and then reach this process around, measure, test, and constantly improve. In doing so, it’s managed to keep us healthy and successful over the course of this major transition over the last 10 years. It’s just a major transition. Linda Rigano: Not without some bleeding. Just moving ahead, obviously, we want to continue to understand the user. We’re looking to get more direct-to-site traffic. We’re looking to come out with more products and services. It’s all, it’s again, it’s going through that cycle, just like Jerome said. It’s coming full circle, going back around. Reaching out to partners … That would either be co- brand partners, or bounty partners like we have with barnesandnoble.com. I think there’s some Amazon people here. Sorry. Other kinds of things, but we’re constantly looking to figure out what can we do that’s going to help that buyer, and what’s going to make that user experience better, because that’s our bottom line. Internally, it’s the ThomasNet folks. What can we do providing more content? Externally, what can we do that’s relevant to the buyer experience? Then, of course, for our clients. That sums it up. MODERATOR: We’re going to take a break. We’ve got a break scheduled now. If you want to take some questions … you can come down here.

Moving From Paper to Online: How ThomasNet Reinvented Itself After 100 Years

Moving from Paper to Online: How ThomasNet reinvented itself after 100 years

Linda Rigano, Director, Strategic Alliances Jerome Shaver, Director of Analytics ThomasNet Tuesday, May 13, 2008

More data on this topic available from::

Who is ThomasNet?

 Thomas Publishing Co; founded in1898

 A global information provider with more than 50 electronic directories, websites and print publications

 Online since 1995; 100% focus on B2B Marketplace

 Mission: Bringing Industrial Buyers together with Sellers

Moving From Paper to Online: How ThomasNet Reinvented Itself After 100 Years

A Little History

“We’ve changed more in the past 10 years than in our first 100 years.”

1898 1918-1995 1996-Present

Today…

The Site

Moving From Paper to Online: How ThomasNet Reinvented Itself After 100 Years

The Stats…

 Over 600,000 companies listed indexed by 70,000 product and service categories.

 Access to over 20 million CAD drawings and thousands of searchable product catalogs.

 Read tens of thousands of product news stories and announcements on ThomasNet News (news.thomasnet.com) every day.

 Activity highlights from 2007

 Over 40 million user sessions/visits.

 Over 67 million product/service searches.

 Over 730,000 CAD drawings downloaded/inserted from ThomasNet clients.

Staying true to core business objectives

Moving From Paper to Online: How ThomasNet Reinvented Itself After 100 Years

Business Objective: Connect Buyers with Sellers

Manufacturers Distributors Purchasing Custom/Service Agents Providers Engineers MRO

…Looking To Conduct Business

Understand Build relevant products/ Buyer/Users Services to fill need Research

ThomasNet Products/Services Measure Continually improve Everything w/ testing

Promote and Market

Moving From Paper to Online: How ThomasNet Reinvented Itself After 100 Years

Understand Build relevant products/ Buyer/User Services to fill need Research

ThomasNet Products/Services Measure Continually improve Everything w/ testing

Promote and Market

Understand our buyers/users: Research

User-centered design is core to all product development at ThomasNet

A Day in the Life of…

1. Where do they currently look for products/services?

2. What information is important to them when sourcing?

3. What level of detail are they looking for?

4. What frustrates them?

Traditional vs. Online

Moving From Paper to Online: How ThomasNet Reinvented Itself After 100 Years

Different types of research

then vs. now Direct mail surveys On-site/online and email surveys

Focus groups Online focus groups

In-person surveys (one-on-one) Webcast surveys

One that has dramatically changed…

Online surveys help us to understand our audience 9 out of 10 buyers start with the Internet to source products and services

Online Activities Amount of Time Spent Researching Products & Services

Researched Products/Services 93%

Looked for 89% Time Spent Rest of Companies Searching for Work Products & Sourced or Services Online Week Compared 81% Products Purchased Products 55%

Industrial buyers spend 8 hours a week looking for products and services online • 60% expect this number to grow next year

Moving From Paper to Online: How ThomasNet Reinvented Itself After 100 Years

What industrial buyers look for online

Product descriptions /specs 90%

Product pricing 84%

Product applications /uses 72%

Locations /distributors -Local 64%

Details on tech support 61%

Information about product suppliers 59%

CAD drawings /plans 42%

On our client’s website, product descriptions/specs and pricing are critical

Key finding: disconnect in marketplace

What buyers need vs. what suppliers offer 74% Product pricing 23% 72% Details on tech support 38% 67% Locations in mycity 36% 64% Shipping information 17% 64% Online ordering 32% 58% CAD drawings 13% 56% Information about suppliers 24% 54% Product articles 37% 50% Product reviews 29%

Buyers expect to find on supplier websites Suppliers providing on their sites

Moving From Paper to Online: How ThomasNet Reinvented Itself After 100 Years

Here’s what our research told us… Situation Opportunities

Spending more time sourcing Increase speed and efficiency of site online

Sourcing online is not easy when Provide more company information looking for complex information in relevant categories

Difficulty accessing relevant suppliers Develop products/services that Detailed information missing enable suppliers to help buyers User/Buyer display information and easily Sites difficult to navigate, take navigate action

Anonymity critical Audit site – keep Privacy key

Here’s what our research told us… Situation Opportunities

Knowing key places buyers Educate suppliers on where buyers source online go first – reps, workshops, etc.

Website falls short of detailed Help supplier build websites, catalogs specs and navigation and CAD drawings that buyers want

Proving ROI – understanding Produce tool to help suppliers identify metrics conversion actions and measure

Client/Supplier activity

Educate through sales force and Inexperience online regular communication

Moving From Paper to Online: How ThomasNet Reinvented Itself After 100 Years

Understand Build relevant products/ Buyer/User services to fill need Research

ThomasNet Products/Services Measure Everything Continually improve w/ testing

Promote and Market

Back in 1905…

Content is “Local search” KING 100 years ago

Moving From Paper to Online: How ThomasNet Reinvented Itself After 100 Years

Moving into the 80’s… “Yes, we killed a lot of trees”

We’re sorry!

We did it all in the 80’s but look what it cost us!

Today…. “and saving a lot of trees”

Moving From Paper to Online: How ThomasNet Reinvented Itself After 100 Years

Today….

Choice of search by product, company, brand or CAD model

Network, talk shop in Forums

Search by product or browse categories --- nationwide or local

Listings

View supplier information

View related headings

Filter by State

Filter by certifications

Moving From Paper to Online: How ThomasNet Reinvented Itself After 100 Years

#1 Website Design and Development (Custom and template)

#2 Online catalog and ecommerce publishing tools --- all custom designed

#3 Online CAD Drawings -- Online CAD Viewing Solutions -- Dynamic Online CAD Solutions

#4 Website Tracking Web Traxs: Market Intelligence to help clients manage their site’s performance

Moving From Paper to Online: How ThomasNet Reinvented Itself After 100 Years

Additional buyer/user focused areas…

 An online newsroom with an average 100 new product articles posted daily

 Available by RSS feeds, Google, Yahoo, etc.

 Daily, weekly, monthly product alerts in nearly 100 industrial categories

 Bi-weekly blog

 Bi-weekly industry newsletter

Additional buyer/user focused areas…

 Expand internationally

 Translated search

 Native translation services

Moving From Paper to Online: How ThomasNet Reinvented Itself After 100 Years

Understand Build relevant products/ Buyer/User services to fill need Research

ThomasNet Products/Services Measure Everything Continually improve w/ testing

Promote and Market

Measure everything “Does the product meet business objectives?”

1. Quantitative user online surveys

2. Traditional and online user focus groups

3. Web Analytics 1. Client side 2. User side

Moving From Paper to Online: How ThomasNet Reinvented Itself After 100 Years

Measure everything “Does the product meet business objectives?”

Print Online

Reader service cards On-site surveys

Direct mail surveys Email surveys

Focus groups Online focus groups

Dedicated 800# Dedicated 800#

Web analytics: online tracking tools* Eye tracking studies

Examples of online measurement tools

 Internal analytics with WebTrends

 Off-site analytics  Tracking 5,000 sites with Web Traxs

 User satisfaction surveys

 Eye tracking studies

Moving From Paper to Online: How ThomasNet Reinvented Itself After 100 Years

Understand Build relevant products/ Buyer/User Services to fill need Research

ThomasNet Products/Services Measure Continually improve Everything w/ testing

Promote and Market

How We Promote and Market Today Traditional Online Direct mail E-mail and newsletters Fax blasts (RSS feeds, Product news alerts) Print Magazine/directory Online Banner, Tile ads ads Trade Shows Virtual trade shows Telemarketing SEM: Voice Recordings Search engine optimization Pay per click Online auctions Catalogs/Brochures Interactive catalog/videos Product inserts/samples Full specs and drawings Testimonials Online video clips

Moving From Paper to Online: How ThomasNet Reinvented Itself After 100 Years

Understand Build relevant products/ Buyer/User Services to fill need Research

ThomasNet Products/Services Measure Continually improve Everything w/ testing

Promote and Market

Continually improve through testing and usability studies

Keep asking: what makes your users click?

Moving From Paper to Online: How ThomasNet Reinvented Itself After 100 Years

How we test…

 Multivariate testing  Search page analysis  A/B testing  Testing creative

Multivariate testing and search page analysis

B K J C F D

E G

Moving From Paper to Online: How ThomasNet Reinvented Itself After 100 Years

Testing creative

Principles employed: 1) Must not compromise user experience or traffic 2) Must improve conversions 3) Must be measurable

Experiment conducted from 6/19/07 to 8/6/07

• 43 tests performed • 16 variables • 85 values • Over 1 billion template permutations analyzed

Winning creative outperformed control by 16.2%

Control (Creative 420) Winner (Creative 506)

Moving From Paper to Online: How ThomasNet Reinvented Itself After 100 Years

Understand Build relevant products/ Buyer/User Services to fill need Research

ThomasNet Products/Services Measure Continually improve Everything w/ testing

Promote and Market

Continuing challenges

 Continuing to understand the user  Attracting even more users (direct to site)  Adding new distribution channels  Adding new products and services  Reach out to partners  Provide more content and services:  Internally (ThomasNet.com)  Externally (Partners)  Clients (Supplier Information)

Moving From Paper to Online: How ThomasNet Reinvented Itself After 100 Years

Credits/Thank You

Linda Rigano, ThomasNet 212.629.1522 [email protected]

Jerome Shaver, ThomasNet 212.629.1522 [email protected] More data on this topic available from::

Subscription Offer Strategy, Part 1: Creating Messaging that Resonates

Session Description: held V- and C-level positions in industries including Stratfor, a publisher of a members-only paid content software, wind power, real estate development, food website, has recently taken a number of steps to find manufacturing and horseracing. His areas of expertise out how they were perceived and what their customers include corporate strategy and product development. wanted. An exhaustive survey of Stratfor’s in-house Eisenstein graduated with a BA from Williams College list revealed customer perceptions on pricing, editorial in 1991 and received his MBA from the University of perspective and other variables and ultimately led to Texas in 1996. He and his wife have a son and live in targeted offers that really hit home with their audiences. Austin, Texas. The result: Sales have skyrocketed. Be sure to attend this case study to hear strategy, tactics and lessons About Stratfor learned and apply them to your own business. Stratfor is the world’s leading private intelligence service. Our global team of intelligence professionals About the Presenter provides our members with insights into political, economic and military developments to reduce risks, to identify opportunities and to stay aware of happenings Aaric Eisenstein around the globe. Stratfor provides intelligence and Senior VP Publishing, Stratfor customized intelligence service for private individuals, global corporations and divisions of the US and foreign governments around the world. Stratfor intelligence professionals routinely appear at conferences and as Aaric Eisenstein has been Senior VP of Publishing at subject matter experts in mainstream media. Stratfor Stratfor since 2007. In addition to prior operational was the subject of a cover-story article in Barron’s and business development roles at Stratfor, he has entitled The Shadow CIA.

PRESENTATION that we did to find out what was going on with our members. We try not to have subscribers. We like to MODERATOR: OK, we’re going to start in about 10 have members. I’m glad to explain that ad nauseum seconds, because we are running late. My name is Tad later. Clarke. I’m Editorial Director, MarketingSherpa. I haven’t had the chance to be up on stage just yet. I’ve just First, let me tell you a little bit about what Stratfor is. been running around with the speaker Q&As. We’re somewhat unusual. We are a private geopolitical intelligence service. If you think of the CIA as being an Speaking of registrations, and evaluations, and surveys, intelligence service, or an intelligence agency, that has our next speaker is Aaric Eisenstein. He’s Vice President one client, which is the U.S. Federal Government, we do of Publishing at Stratfor, and he’s going to walk through much of the same kind of work, but we do it for lots of how Stratfor has done some – a recent survey to its folks. We do it for our government. We do it for foreign readership, something that we did at MarketingSherpa governments. We do it for corporations. We do it for earlier this year. private individuals. We find out what is going around in It’s something you should do on a regular basis. It the world, militarily, economically, politically. doesn’t have to be annual, but you know, just finding We do analysis, situational awareness, and forecasting. out what your readers, what your subscribers, just your So, if you’ve got bets that are going on around the users, have to say can give you some insights, some world, because you’re traveling, you’ve got facilities, things that you might not know already, and things just you have investments, what have you, come to Stratfor, to help you if it’s a gut level experience just to go to we’ll tell you what’s going to happen. the next thing saying, “Yeah, this supports exactly what we’ve got to say.” So let’s bring up Aaric. Like I say, we’re a member’s-only site, which means that we’re a paid content site. We don’t have any advertising Aaric Eisenstein: Hi. I head up Stratfor’s publishing as a revenue model. Our sales model is oriented towards business. I’d like to walk you through just a few things an in-house email list, which is the free list, and that

Subscription Offer Strategy, Part 1: Creating Messaging that Resonates

will really be kind of the subject of our discussion respond to anything. today. Naturally, what I did was I turned to the guys that We do quite a bit of work selling longer-term memberships actually write our stuff and I say, “OK, you’re writing’s no to our existing members. Somebody may join initially good.” The intelligence product itself had deteriorated for a month-by-month membership or a six-month and primarily because that was my boss’ responsibility, membership, and then we’ll subsequently migrate them that was my best guess. Then there were exogenous to a one-year, a three-year, a five-year, or a lifetime factors that we could look at. This all kind of takes place membership. We do, of course, walk-up business, folks in the context of late summer, early fall of last year. It’s that come in through SEO, through friend referrals and entirely possible that people had been remortgaging so on. We sell through some co-marketing arrangements their homes and taking out $350 in a cash-out mortgage with partners. and buying a Stratfor membership. When they couldn’t refinance their homes anymore, well maybe they didn’t Our customer, if you will, is kind of the – well, I put up have another $350. That could have been the problem. here – let’s see, how does that work? Dick Cheney, but apolitical. If you think of the man, right, the fat, white, Or anybody read a blog? An opinion site? You should. bald guy who probably has some military experience, You should read our stuff. A lot of people do read these certainly has corporate experience, that’s our market, things, and so maybe it was just that whereas before if people that want to know what’s going on in the world you wanted to know what was happening in the world because of their own edification needs, or because either you read The Times, or you came to Stratfor and they’ve got business needs. But it’s very important to those were the only two choices. And now with the note that we are apolitical. We’re not liberal, we’re not advent of blogs and opinion sites and what have you, conservative. We’ll get into some of this momentarily, particularly for some of the folks that wear the tinfoil but that’s who we are. hats, there were just other alternatives. We were just facing a competitive market. As I said, kind of the traditional method of our selling has been that we have a free email list for which you All of these were equally likely, particularly my boss’ can register on our website. Folks have come, they deteriorating quality, and so we didn’t really know. sign up, they get some free content every week. It’s Being an intelligence operation, we decided to conduct arguably our best content, which is a whole other story. an intelligence operation, so that’s what we did. We did In exchange for that, we send them campaign emails. a very simple survey, and I’ll show you kind of excerpts So once or twice a week, they’ll get another email from here. If anybody wants any of the surveys, I’m glad to us that says, “Stratfor’s great. It’s discounted. Here, go send you all the stuff that we did. ahead and buy.” Again, I’m not a marketing guy, but right before I did That had worked fairly nicely for quite some time, and this I took a survey. I noticed there were some people then we reached a point where – I won’t say that it here from Dow Jones. Dow Jones? No? Barron’s? Yeah, fell off a cliff, but it really wasn’t where we wanted OK. Sorry. I did a survey on Barron’s. It was a 60-question it to be. Growth was absolutely anemic. It just was survey, and it was all the standard stuff that you have trickling along. It just wasn’t where we wanted. I’m to ask for your advertisers. Are you going to buy a car? not a marketing guy. I run a line of business, but I’m Are you going to lease a car? Do you like Acura? Do you responsible for sales, I’m responsible for marketing. We like Lexus? I understand, but it wasn’t relevant. I did it looked at kind of the traditional explanations of why just to kind of see what real people do surveys, because our sales, that had been growing nicely, just stopped. mine wasn’t going to be like that, but I was curious. One answer, of course, was that the list was tired. We kept it personally relevant. The subject line of the I know many of you are email marketing professionals, email asking people to take the survey was Stratfor and you can actually tell me what a tired list means. Survey: Six Quick Questions. So everybody knew right I don’t claim to understand that. All I knew is people in six questions, real easy, it’s for Stratfor, here we go. weren’t buying. What they were tired of was unclear to As I’ll show you, everybody talks about testing, and me. Maybe they were tired of stale offers, right? I’ve it’s right, and yesterday’s presentation on testing, and always given you $50 off. Fine, you don’t want $50, particularly at Encyclopedia Britannica, I thought, was you want $40. You want $60. I don’t know, all right? I very good. As a scientist, you look at one independent wasn’t hearing what they wanted, so I couldn’t really variable, or one dependent variable, and you try and

Subscription Offer Strategy, Part 1: Creating Messaging that Resonates isolate the effect of that variable. Well, when everything We’ll do another survey. Anybody? OK, good. You’re is broken, don’t test one thing. Throw the whole damn time- constrained. If things aren’t absolutely relevant thing out and start over. That’s what we did. and on point, you’re not interested. Certainly there’s a value proposition in just being able to, in essence, cull All right, so this was the email that we sent out to everything that’s out there and provide people with just people asking them to take the survey … A few things what it is that they want, just what it is that they need, to kind of try and keep it personally relevant. “Dear and provide it with a little bow around it, and serve it Stratfor reader.” It sounds sort of like a letter. On point up on a platter. They’re time-constrained. and relevant, that enhances the notion of relevance. “Thanks for your help. Please don’t hesitate to contact We’re going to talk a little bit about quality of mind, me directly.” It’s got my name, it’s got my phone number, free of agenda. By quality of mind – that’s kind of a and I put in there ‘direct line’. So this is really a human euphemistic way of saying that we’re smarter than other being that’s contacting you. It’s not the marketing people. I say “we,” my intelligence team is smarter than department. It’s not the survey department. It’s not other people that write for mainstream media. They’re some faceless – however these things get out there. It really smart. That’s quality of mind. They’re smart, was a real human being with some questions and people they write well, they’re interesting, they ask unusual responded nicely. questions. They’re not subject-matter experts, so they look at things differently than people that are experts. The six questions. In this building it’s usually the four They come at things from a different perspective, and questions, but we’ll do the six questions. How long the most important thing that we’ll talk about in a have you been receiving free Stratfor emails? Curious. moment is that they do so free of an agenda. How did you first find out about us? How did you sign up for the Stratfor free email list? What areas interest People were price-sensitive. Surprise. The overall you? Those are geographies. Do you like the Middle response rate to the survey was about 11%, and 20% East? Do you like Europe? Do you like Latin America? of the people filled in the blanks. For most of the If we were to offer special inducements to join Stratfor, questions, we made it very simple for people … We what would most appeal to you? Lastly, how come you made the questions very simple. Little fill in the blank haven’t joined? if you wanted to, but most of them were just select the buttons. You didn’t have to get creative. You didn’t have Really, there’s no question that this survey is trying to be open-ended. Frankly, you didn’t have to think to find out information that I can use to sell them much. We just made it fast and easy for people. something. It’s very explicit. It’s very up front. At the same time, if they answer these questions, it’s fairly So a little cognitive dissonance. We talked about the clear that they’re going to get something in return. In survey, and now we’re going to switch to what we had other words, more coverage of areas that interest them been doing prior to the survey in terms of the email or special inducements that they actually want. So, marketing that we did. Nearly – I’d say probably north instead of offering a coffee mug and a tote bag, maybe of 80% of our sales come through email marketing … it’s a free book or maybe it’s a special report. Come to This is terrible. This is what we were doing before, and find out, they didn’t like some of those things. it’s really bad. It reads – you know, you can almost read it in that announcer voice and it reads better. It almost The whole notion was to make it very clear that in the cries out for that. The notion that, “The flexibility of our event that they answered the survey, their lives would monthly or quarterly membership packages, at lower, somehow be enhanced. Not just mine, and certainly not more affordable rates, or our annual membership at a my advertisers, but that this was going to be directly deeply discounted price, available only through this focused on doing something nice for them. I’ll benefit offer.” Now, you could call us. There were other offers. in the meantime. Frankly, this is great if you’re kind of – gosh, I would All right, so we did the survey, and we found some buy this but for the fact that they only offer a six- interesting things. The overwhelming majority of the month membership, or I really want a three-week and people had been reading our free email list for somewhere they have a four- week … We did the survey after this between two and three years. That’s interesting. didn’t work. No wonder. They’re time constrained. Anybody get enough time to Now this I know you can’t read, and it’s really read all the stuff that you want to read on the Web? unfortunate. Does everybody here get the slides? Good.

Subscription Offer Strategy, Part 1: Creating Messaging that Resonates

Look at this slide. It’s really good. This says - wow, you think that it’s a little left of center, a little right of I don’t know what this says. This says, “Dear Stratfor center, or right down the middle? Left? All right, good. Reader”. Let me paraphrase. We took a survey. We really If you were to listen to Fox News, would you think that appreciate it. It was very kind of you to help us out. We it’s a little right, a little left, or right down the center? listened to what you said, we’ve taken it to heart, and Far right. All right. So fair and balanced it’s not. OK. here’s what you told us. OK. This notion of echoing is incredibly powerful. This right Well, come to find out – and let me ask this question, here, as you can obviously tell says, “You told us.” This because this really is sort of the fundamental one. How is what you told us. You told us that $349 was too many of you feel satisfied that what you’re getting is expensive for a casual reader. You liked quality of mind, let’s say good? A handfulish. All right, entertaining or free of an agenda. You’re time- constrained and you actually good? Good. OK, fair enough. The rest of you needed better ways to organize information. These are are my customers. Remember we were talking about kind the things that you told us in the survey. of this apolitical notion. What we found very clearly and this was completely again, the unintended consequence, I echo them right back to them, and then I follow up this was the unexpected consequence, is that there is with, coincidentally, we’re launching a new website. an enormous hunger out there for awareness of global “Our new website is designed specifically to address events, and presumably of domestic events as well, these concerns because we’re trying to be responsive to although we don’t really focus on domestic events, that the needs that you identified for us.” You can manage is free of partisanship, that is free of bias. information, find it, get it, and so on. “All best wishes, Aaric S. Eisenstein, Vice President of Publishing.” Again, How did the normal media do free of bias? Well, what it comes from a real person. It’s not an advertisement. they do is they find some hack on the left and some hack It’s a personal letter. on the right, and they have them scream at each other for three or four minutes and somehow this is supposed Come to find out, things start to go kind of in the right to reveal the truth. It’s haggle gone awry. What we do direction. People voted with their feet, and we then as an intelligence organization is very different than echoed some more. So what we did was, coming out of media. Media reports, we analyze, OK? the survey, we found that what people were interested in was saving time and non-partisanship. Those were What they’re doing, in the interest of being fair and two answers that came back in the survey quite a bit. balanced, or straight down the middle, or whatever you So, we ran two emails that were essentially the same, want to call it – I mean they’re just slogans – is they but kind of had a somewhat subtle thematic difference provide a variety of different opinions. Their sources emphasizing those two points. We used identical subject come from different opinions. lines, so you see that the open rates are exactly the Nobody has to be right, you just have to have somebody same. The clickthrough rates were pretty dramatically on the left and somebody on the right. That’s great if different. So, this notion of non-partisanship really was that’s what you do. We, on the other hand, have to be the winner. right. Let’s have some fun, all right? Anybody watch Fox Now you don’t have to like it. If you’re in Lebanon, and News? Come on. Nobody watches Fox News? One. Thank we write a piece that says, “You know, guess what? you. The rest of you are liars? Nobody is - wow. OK, Your life is about to be really miserable for the next who watches CNN? Fascinating. All right, who listens year,” we’re going to upset people in Lebanon. It’s like to NPR? All right. I presume nobody listens to Rush going to the doctor and being told you have cancer. The Limbaugh, or Hannity or yeah? Yeah, OK. OK. Wow, this state of the world in which we currently live is swirling is really going to be interesting. Very different than around the bowl. It’s nasty. There you are. But there are what I expected. a lot of people out there, interestingly enough, that OK, so those of you that listen to NPR, how many of you want to be told this. That’s kind of what we found. would identify yourselves as conservatives? One, two. We found that this message of non-partisanship OK. How many of you identify yourselves as liberals? really, really resonated with people. They don’t want Everybody else. Now, when you listen to NPR – and we’ll Rush Limbaugh and they don’t want Al Franken. They ask the same question about Fox News, but there’s going just want somebody to tell them what’s really going to be a resounding silence – when you listen to NPR, do

Subscription Offer Strategy, Part 1: Creating Messaging that Resonates on. That’s what we emphasize. When you’re done, you where the United States is? How does this work?” You pound it again. get a bunch of smart people together in a room and you analyze things. That’s analysis. This message – actually this one I can almost kind of read. “Dear Stratfor Reader: Follow a thought The alternative is you break into the Kremlin and you experiment with me. Assume traditional news media steal the plans out of some guy’s desk. That’s intelligence. had absolutely no political or partisan agenda. Work What we did for two years, because we had been scared with me here. In the interest of reportorial objectivity, to ask our customers what they thought, and because each article, TV segment, etc. has a variety of inputs when we had asked them we asked them are you male or from people with diametrically opposed views yelling female? Are you 50 years old? Are you 60 years old? Do at, or at best, speaking past each other. For good or ill, you have household income above this? Are you buying market realities have forced traditional media to appeal a car? OK, right? We had done analysis, because that’s to niche markets, polarizing them toward either the far what was easy and didn’t put you in the position of left or far right.” potentially offending somebody, I guess. I don’t know what the fear was. Anybody object to that? Anybody think that that’s true? Anybody still awake? What really came out of this Alternatively, sending out a survey is intelligence. You whole kind of survey and then email follow-up – and I’ll ask a question, you get an answer. Both together are show you some subsequent surveys as well – process necessary in order to have a coherent picture of what’s was that the notion of somebody providing information going on, because intelligence, stealing the war plan free of political bias, of agenda, but with insight and out of somebody’s desk, doesn’t tell you whether or not analytical strength was attractive, and there we are. they’re actually going to use it, just like asking a bunch So we’ve really been hammering this message because of survey questions without having a concept and an that’s what we do. understanding of how your business actually operates, and being able to swap those specific, discrete pieces of What happened? Well, sales went up by 13 times in a information into an overall strategy doesn’t work. month. It would be very easy to point to one variable and say, “Ah, we changed the button from gray, to red, You’ve got to do analysis, you have to do intelligence. to orange, to green, and we put a little arrow on it, and Don’t allow one to predominate over the other, or that’s what caused the sales to go up.” I have no idea exclude the other, to the point that you either operate what caused the sales to go up. That’s not true. I have in kind of a group think mode or, alternatively, you have a variety of ideas of what caused the sales to go up. As lots of random bits of data and no coherent strategy on a business owner, the sales went up. how to employ them. Fortunately, it’s been a somewhat replicable process in Along those same lines, people want to tell you, so don’t the sense that it wasn’t just a one-time spike. We shot fear them. The notion that once you’ve got somebody’s up and kind of established a new baseline. The variety money that you’ve kind of duped them, and that you of things, whether it was echoing a message, whether it don’t want to talk to them again until such time as you was a changed format, whether it was a personal touch, want to sneak that automatic renewal, which, by the whether there was kind of a meta influence going on, way, we do automatic renewals, and we have a hard which was just that people were more receptive to cancellation policy. The notion, though, that they don’t buying something after they had been surveyed about it want to hear from you again until ever is wrong. They inherently. Now I’ve been sufficiently kind, or solicitous, do want to talk to you. to ask you what you wanted. Now I give it to you, and We get tremendous amounts of feedback on a daily basis, so you feel obligated to buy it. I don’t know. There are a both about the analytical content of our work, as well variety of different things going on, all of which I think as kind of the business side of things. To brag, I even contribute, so play with those. got some fan letters about some of these campaigns The lessons learned: In the intelligence world, there are that I wrote. They were really fun, and some of them kind of two things that you can do. One is intelligence bordered just this side of obnoxious, which I’ll be glad and one is analysis. Intelligence is sitting around to talk about. – sorry, analysis is sitting around and thinking, “Well The key is that you have to listen to people when they gosh. You know, what are the Soviet’s war plans going do tell you something. Have you ever said – you go to to have to be, given where they are in the world and

Subscription Offer Strategy, Part 1: Creating Messaging that Resonates

your spouse, right? “Do you like this tie?” “No, I hate what we found out at the survey. If not, all you’re doing that tie.” You walk out wearing the tie. There’s nothing is setting yourself up to fail and, potentially, disappoint ruder than that. If you’re going to ask somebody’s people. Would you like this? Oh yeah, we’d love that. opinion or their advice, take it. If you’re not going to Sorry, don’t have it. That’s a bad question. take it, don’t ask. That’s rude as hell. This is a great tie. MODERATOR: Question over here. Clearly, have some fun. Participant: Hi. When you ran the echo messaging Like I say, I didn’t know what I was doing with the back, after you’d run the surveys, did you run that only surveys, and as I mentioned to Tad earlier, one of my to the people who had responded to your surveys, or to colleague’s wives is a – she’s Ph.D. in surveys. I don’t everyone? Did you have different messaging to those know what her field is, but she does surveys. So she looks who perhaps did not respond to the survey? at my survey, after we’ve run it, and she’s just aghast. “You did this wrong. You didn’t control for that. These Aaric Eisenstein: No. It’s a good question. In theory, variables – .” You’re right. Remember the 13 times? That we would have loved to have been able to segment down was a hell of a good survey. So have some fun. to the micro level. At the – no, that’s – well yeah, at the time we had an email list. Either you got this message The answers in a survey, where you’re ranking things, are or you didn’t get an email. We ran it to everybody. There strongly agree, moderately agree, neutral, moderately it is. Yeah, but it worked. It seems to be – you know, disagree. No. The yes was ‘in a heartbeat’. The no was the other thing that’s kind of interesting about that, ‘no way in hell’. Have some fun. People are going to be and I meant to bring this out in the presentation. The much more responsive, they’re going to be much more difficulty in sales is educating somebody about what it engaged. Frankly, they’re going to think you’re a human is that you have and why they want it. being instead of just something that comes out of the default savings in Survey Monkey if you have some fun. If instead, you’re simply responding to something You’re not going to offend people, unless I have. that they already bring to the table – so for example, the guy walks into the room and says, “You know, the Those are the lessons learned. I’m glad to send any newspapers are terrible.” Fine, I don’t have to convince creative to people that want to see it, or just answer you of that. You already bring that to the table. I’m questions, assuming we have time for questions. the answer to terrible newspapers. It’s a much easier MODERATOR: We’ve got time for a few questions… process, and I think that’s a big chunk of why we were able to do what we’ve done, rather than saying, “Hey, Participant: How many people called your direct line? let me explain geopolitics to you and why global affairs Aaric Eisenstein: About four. I get a ton of emails, a are important, and then after this six month process, ton of emails, and I had about four people call just to you should buy from me.” visit. Really. We had nice chats. Yeah. So being able to respond to something that’s already in Participant: Less a question than a comment. I totally the room just really makes things a lot easier and faster agree with you about the short surveys, but I would on the sales person. add that not only are they better for the users, but Participant: Did you learn anything about the pricing they’re also better for the company, because you’re so of your product from your survey? much more likely to get actionable intelligence, If you don’t have 50 questions and you don’t have to like run Aaric Eisenstein: Not from this survey. We have done regression analyses on every single thing. some price testing. We finally got sophisticated enough that we could do that, and so what we would do is Aaric Eisenstein: Yeah, especially if you don’t know we segmented a list into A, B, C, D cohorts, and ran a how to run a regression analysis. OK? What I knew how rotation of four different price points at three different to do – I mean you’re exactly right. There’s another modalities, monthly, quarterly, and annual. aspect to that to, which is survey questions. Would you like me to do 3-D holograph maps of the places Come to find out the prices we’d been using were the that we cover? Sure. Great, I can’t do that. Don’t ask big winners. Now whether that’s because they were a question if you can’t live it up. All of the questions right, or because that’s what people were accustomed that we asked were directly actionable in the sense that to seeing, I don’t know. I don’t know. The surveying, we we would be able to take a responsive action based on didn’t do any price testing other than just anecdotally,

Subscription Offer Strategy, Part 1: Creating Messaging that Resonates

“You’re expensive.” MODERATOR: Question back there. Last one. I mean $350. It’s very interesting. I talk to a hedge fund Participant: My question is, you mentioned earlier, trader, and I say, “Yeah, we’re $350.” He says, “That’s and you said that you were going to get back to this, it?” Then I talk to the guy, the retired sailor living in and I don’t think that you did unless I zoned out. You Phoenix, and he says, “Listen, I’m on a fixed income. I said that your – arguably – your best content is being got nine bucks a month. What can you do for me?” And given away in the free emails. How do you balance that I’ve got one product. So, it’s a little tricky. Now, the out, and how do you decide which content you’re going answer, of course, is to have two products, but that’s to deliver where? a whole other can of worms. So, no, we didn’t do any Aaric Eisenstein: Sadly, it’s very easy. We have two, price testing in the surveys. like I say, we’re an intelligence service, which means Participant: Hi, I was wondering what your response that we’re not columnists, we’re not pundits, we’re not rate on that survey was, and if it differed from previous editorial writers. None of our pieces that are sold has ones? a byline. Everything is simply produced by Stratfor. Period. We have two pieces a week that go out bylined, Aaric Eisenstein: On this second survey? and those two pieces, depending on what you like, are Participant: Were you satisfied with the number of our best pieces. people that responded to it in relation to the total One of them is written by our Chief Intelligence Officer number of people that received it? and Founder, George Friedman. The other is written by Aaric Eisenstein: Yeah, absolutely. Again, I’m no a guy who, if you’re in the security world, is a guru mathematician, but we sent out – I don’t know, call named Fred Burton. Those have a byline, and those are it 1,000 – no, that’s low. We sent out 10,000 survey mailed out to a free list of about 85,000 people. We invitations and got about 1,100 responses. I presume internally tend to think that those are our best pieces that this is statistically significant. I thought that was because they’re longer, they’re analytical. They are really good. thinkie pieces, as opposed to being a quick analysis of a breaking event. Participant: I also had another question, or a comment. I wanted your feedback on it. I’ve been thinking of Now, some people don’t like them because they’re too doing surveys using Ajax and embedding the survey long. I got into a whole running email battle, campaign, right into the website. So maybe they visit the home series, etc. with some knucklehead who was complaining page, they’re ready to do their daily thing, and they because our piece was too long. I referred him to a see an icon, or they see something that’s not obtrusive, bumper sticker. There are – in a campaign, by the way, but they notice it. It says, “Start a survey.” Then they and it was a lot of fun. We think that’s better. Should take six questions and it disappears. Is there any – have we be giving that away? Should that be our sold product you thought about the user experience with surveys? and should we give away something else is a question Emails, is it the best way to do it? that we’ve debated internally but not really resolved other than through inertia. I don’t know the answer. I’d Aaric Eisenstein: You know, we had an email list, so love to know the answer. Thanks very much. that’s what I used. But Survey Monkey, which is the outfit that we used technically, which costs you all of MODERATOR: Thank you Aaric. $200 a year – you can do as many surveys as you – plug for Survey Monkey – as many surveys as you want for $200 a year, with no IT involvement. In my shop, to get the IT guys to do a survey, as opposed to having them build features for the sold product, was insane. Not at $200. Now Survey Monkey will give you a link that you can embed in a button, or whatever you want to put on the home page of your site, and you click that and poof, up comes your survey. For $200, it’s tough to go wrong.

Subscription Offer Strategy, Part 1: Creating Messaging that Resonates

Subscription Offer Strategy Part 1: Creating Messaging that Resonates

Aaric S. Eisenstein, Senior Vice President Publishing Stratfor Tuesday, May 13, 2008

More data on this topic available from::

What is Stratfor?

 A paid, non-partisan, private geopolitical intelligence service  For Members-only, think Dick Cheney but apolitical  Sales channels . In-house email list . Membership extensions

More data on this topic . Walk-up business available from:: . Sales through co-marketing partners

Subscription Offer Strategy, Part 1: Creating Messaging that Resonates

Our Challenge – Anemic Sales Growth

 A tired list  Stale, deaf offers  Product quality deterioration  Exogenous factors . Economic slowdown . Growth of blogs/opinion sites

More data on this topic available from::

Our “Intelligence Operation”

 A simple survey to the in-house email list  Keep it personally relevant  “Stratfor Survey – 6 Quick Questions”  Make quantum decisions but learn iteratively from sales efforts

More data on this topic available from::

Subscription Offer Strategy, Part 1: Creating Messaging that Resonates

Keep it Personally Relevant

 Dear Stratfor Reader: We're working to make Stratfor Membership more on- point and relevant. As part of this effort, we'd be most appreciative if you'd answer 6 very quick questions for us. Here is a link to the survey: http://www.surveymonkey.com/s.aspx Thanks so much for your help, and please don't hesitate to contact me directly if there's anything I can do to make your Stratfor experience even better.

More data on this topic All best wishes, available from:: Aaric S. Eisenstein VP Publishing [email protected] 512-744-4308 (Direct Line)

The 6 Questions

 1. How long have you been receiving free Stratfor emails?  2. How did you first find out about Stratfor?  3. Why did you sign up for the Stratfor free email list?  4. Please tell us what areas interest you.  5. If we were to offer special inducements to join Stratfor, what would most appeal to you?

More data on this topic  6. What's kept you from joining Stratfor as a available from:: (paying) Member?

Subscription Offer Strategy, Part 1: Creating Messaging that Resonates

Dramatic & Clear Conclusions

 Committed readership – 2-3 years  Time constrained  Want “Quality of Mind” free of agenda  Price sensitivity  Overall response rate – 11%  Write-in answers – 20%

More data on this topic available from::

Before – No Wonder

Have recent global events caught you by surprise or the headlines left you searching for more understanding? After mainstream media tell you WHAT just happened, ever wonder WHY? Stratfor members know. With Stratfor's network of worldwide intelligence sources and world-class analyses you will clearly understand what drives world events and shapes our future. Gain access to the kind of intelligence tools used by large corporate clients at rates you can afford with the flexibility you need. Try the flexibility of our monthly ($24.95) or quarterly ($59.00) membership packages - at lower, more More data on this topic available from:: affordable rates - or our annual membership at a deeply discounted price of $199, available only through this offer.

Subscription Offer Strategy, Part 1: Creating Messaging that Resonates

After - Echo

More data on this topic available from::

Vote With Their Feet and Echo Some More

 “Test” for a resonant message  Then hit it again  And when you’re “done”….

Message Open Rate Click Rate Saves 22.25% 3.63% More data on this topic Time available from:: Non- 22.34% 4.94% Partisan

Subscription Offer Strategy, Part 1: Creating Messaging that Resonates

Pound It Again

More data on this topic available from::

So?

 Sales went up 13x

More data on this topic available from::

Subscription Offer Strategy, Part 1: Creating Messaging that Resonates

Lessons Learned

 Intelligence versus analysis  They want to tell you, don’t fear them  LISTEN to them, do what they tell you  Have some fun

More data on this topic available from::

Credits/Thank You

Aaric S. Eisenstein, Stratfor 512-744-4308 [email protected]

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Subscription Offer Strategy, Part 2: Going Viral

Session Description: Phanfare launched in 2004 as an online destination to Prior to Phanfare, Andrew Erlichson was CEO & co-founder store family photos and videos. Realizing the potential of Flashbase, which was acquired by DoubleClick in 2000. for growth through photo sharing, the Phanfare At DoubleClick, he was Vice President of Technology for management team established a system to support the Research and Development Group. Erlichson has many community and collaboration features. This worked at Mips Computer Systems, Silicon Graphics and nimble subscription-based business has grown virally BlackRock Financial Management. Erlichson received his by establishing a way for families and friends to stay AB from Dartmouth College and his M.S. and Ph.D. in connected and by providing a valuable service. Gain Electrical Engineering from Stanford University. valuable insights on a cost-effective subscription marketing strategy that delivered big results. About Phanfare Phanfare is a photo and video sharing network for About the Presenter families. Phanfare combines industry-leading online photo and video sharing with social networking to Andrew Erlichson provide families with a secure, collaborative place to share and preserve memories online. Our online CEO, Phanfare Inc. slideshows combine photos and videos together with customizable music and captions to provide an engaging and emotional online experience.

PRESENTATION: We revamped that company and as a sweepstakes system, which then was subsequently sold to DoubleClick. MODERATOR: OK, next up we’ve got Andrew Erlichson. That was sort of my introduction to marketing. I knew He is CEO of Phanfare. Phanfare is a paid photo-sharing nothing about marketing before then. I’m an engineer site. They went through and revamped everything. They by training. So, it was kind of odd to realize that this added a referral program, they really got into community, was the whole world out there of marketing. using word of mouth, linking and social networking. Then they added a free level service into that as well. I went to work for DoubleClick, and I worked for the It became just a big viral effort. Andrew is going to tell founder of DoubleClick, Dwight Merriman, and we used us how that all went. to talk about – we were both engineers by training, and in fact, the engineering problems are very trackable, Andrew Erlichson: I’m founder and CEO of Phanfare. because you kind of go in there, and it’s kind of like Sorry, I’m a little bit sick today actually, and my voice cleaning the bathroom. You know what needs to be is not great. This is our second company. The first done, and then when you’re done, it’s over and you company was sold in 2000 to DoubleClick. It started as leave. It’s not that complicated, and we can build a way to collect data online, make a file, make a pro for almost anything. But, the business problems are hard. the Web. We looked at what everyone was doing with The reason that they’re hard is that they’re an art as that system at the time, and they were doing a lot of well as science and there’s no clear way to know how to different things. fix these things when they’re broken. They were collecting data for surveys. They were So Phanfare was founded in 2004. We started it because doing things that were help desk oriented. They were there was no place on the web that we wanted to put collecting sweepstakes entry forms, oddly enough. We our own photos and videos. We thought that Shutterfly, looked at that and realized that they were collecting Snapfish, and Kodak were the Black Flag roach motel of the sweepstakes entry forms mostly to get data for photo sharing, where your photos checked in and they opt-in email marketing. So the idea was to run a never checked out. You couldn’t get back your full-size banner ad and then collect some information, get the originals. It was all about just selling prints. conversation going, and then follow up with opt-in email marketing. We went off to build something that we liked that would create these websites for people with great tools,

Subscription Offer Strategy, Part 2: Going Viral

where they could put up all their photos and videos. The for free. The reason is that the average person has five premium photo and video sharing service was $54.95 gigabytes of data, and it’s in a sense the world’s least a year, and there was no advertising. There was no valuable inventory because the page views per byte advertising on the site. The main offer was unlimited stored are very low. There’s ten people in the world who storage, no ads, and a faster workflow. want to see your stuff, and no one else cares whether it’s there or gone forever and ever. This is a typical Phanfare 1.0 website that, if you can see, it doesn’t even say Phanfare on it. This is a public It’s the opposite of YouTube, or Flickr, which is sifting family album, and we’re very about privacy. We didn’t through the content to find the stuff that will relieve want to put anyone’s stuff out there. There’s a Phanfare us of our perpetual boredom, right? It’s very important logo beneath the fold. You could actually remove it if to you individually, but not very important to the wider you wanted, and you could use your own C-name, your world. So any media based approach is going to be own domain. So my stuff used to run at www.erlichson. extremely difficult. Five gigabytes, what does that cost net for my friends and family. you? Amazon charges about $2.00/gig a year to put it on their Amazon S3 service. That’s about $10 a year These were completely siloed. As silos, there was no to support a user that’s paying you – I’m sorry, that’s network effects whatsoever. There was no virality really, paying you for unlimited storage. Getting $10 of ad except for the word of mouth. Some people like this revenue per year from a user, when Google does it that’s type of service. But, for the one millionth user who probably the exception, but ads that are run of site, showed up at Phanfare, or for the first user, Phanfare sitting on photo-sharing sites, they don’t do very well. had pretty much the same value. It was not like eBay, You’d have a very hard time breaking even with that. let’s say, where going with – where the buyers go to the sellers, and the sellers go where the buyers are. There As I said, it’s a Web hosting model. We never stood was very little that would make this more defensible at between us and the users. We didn’t want to contact scale than it would be on day one. our users, their viewers. You were our customer and you did what you want with the site. It was a mix of small We gave you this desktop client. It was this fully businesses, wedding photographers, location scouts, connected client. It looked a lot like iPhoto, if you’ve real estate agents was 20% of it, and 80% of it was ever used iPhoto, or Picassa. The difference is this consumers that just didn’t want to – they wanted a thing gets its personality from the clouds, so you log siloed approach. into it and it synchs all your photos and videos from the net down to your desktop so you can use it on any We said, “OK, this has got to change or we’re going to computer. be like a profitable lemonade stand is what we’re going to be.” We were using all the methods you might expect The offer was a 30-day free trial. We had phone support, to ply our customers. We were doing about $40,000 or and $54.95 for unlimited storage. After about three $50,000 of AdWord spending, we had a referral program years of this, and about $2 million in venture capital where you get a year free if a friend signs up and pays – and we’re a small business – we had about 11,000 for the service. We would give you the second year paying users and did a little under a million dollars in free, so it sort of didn’t cost us anything from a cash revenue. standpoint. It was all out in the future. It grew by word The first thing about the net is that any time you of mouth. charge consumers money on the net, you’re pretty much As I said, very little economy of scale, very few network guaranteeing that you’re going to be fairly small relative effects, but very loyal users. When we did a survey and to a larger play that was based on advertising. You have asked them the net promoter’s score, how likely would to assume that eventually most things are going to be you be to recommend Phanfare to a friend, we were free on the net, because Moore’s Law tells you that the sitting between FedEx and Apple in terms of our rating. costs of producing – of the storage and the bandwidth That was nice, but we were very small. are eventually going to be cheap enough they could probably be supported by ads. We had a cost per paid conversion of about $175. That was looking at the amount of money it would take. In this particular space, which if you look about it, We tracked everything very carefully, so looking at a is like a road littered with companies that have come keyword click and figuring out how many people would and gone and dead. It’s very hard to offer this service go to actually sign up for the service. We had like a

Subscription Offer Strategy, Part 2: Going Viral

6% sign-up rate on the site, and a 25% sign-up to to put up a lot of stuff, offer it for free to the people conversion rate to paying, which was very high. The who want to put up a little stuff, and then hopefully numbers were all small, so it didn’t really scale. get to the day where we can actually make it more of a media play? This is sort of the virtual cycle that we Fully blended, the cost per conversion was about $45, were trying to capture with the 2.0 service, which is which included all the free virality we were getting in that you would add photos and videos to the system, terms of people saying, “Man, you’ve just got to try this you’d add your friends and family, which would invite service. It’s fantastic. These guys are awesome,” which them to sign up for a registration, and then when your mostly happens offline, by the way. friends and family sign up to a registration, the security We decided to just reinvent what Phanfare was entirely. model would be based on that. So, unless your friends We looked at what was happening with Facebook and and family were registered and connected to you, they said, “God, you know, this is a lot more collaborative couldn’t see your content. and a lot more social than our approach, which creates We thought this made a lot of sense for families because these little silos that have almost become vanity we thought: Why would they ever want their stuff presses, if you will.” out on the net for everyone to see it at an open URL We saw Facebook kind of coming up in the rear and we anyway? I mean, don’t they care about the security of said, “OK, they’re not really hitting our demographic the situation? Then they would share – so you would add today, but they’re going to eventually. It’s pretty obvious your friends and family, they would create accounts, and that they’re going to get there at the current rate.” We then your friends and family would register. Eventually said, “Marketing is just so expensive.” If there’s only 1% they would hopefully add content themselves, and add of people who are going to – 1% to 5% of people are more people. The idea is that this would help prospect going to pay for a service that costs money when there for us a bit and find people that would be willing to pay are free alternatives on the net, then we need some way for the service in the short run and, in the long run, to prospect to these people that doesn’t involve buying increase our overall reach. keywords on Google against a bunch of non-economic Why is reach important? Well, reach is important in this competitors who are just setting fire to money. business because it’s the first, second, and then the last We looked at that and said, “Wouldn’t it be better question that anybody will ask you if you’re looking for if the whole thing was more of a social network for integration. If you call Canon and say, “I really want to grownups?” So instead of just creating a siloed site, you be your next generation wi-fi camera, and I’d love if you put your friends and family into the network, gave them actually pushed photos directly to Phanfare.” They say, a free level of service, and let them get updates and “Well, how many users do you have?” You say, “Well, get a consolidated view of what was going on around I’ve got 11,000.” There’s like silence on the other end them in the Phanfare network. Give them this news feed of the line. They’re done. They don’t care. If you said, of my brother-added photos, my sister-added photos, “I have five million.” They’d never ask if you made any whatever. That solves a lot of the prospecting problem money. They don’t care. They just want to know what because, of course, by adding their friends and family your reach is because that’s how they measure the value to it, they’re creating free users that engage themselves of adding the feature to their cameras. with the service and then get to know it a little bit The same thing is true for digital picture frames, wi-fi better. Then if they want to add content they can. frames, which are coming, right? We all know. It’s big We have to cost control those users because at the prices this year, manufacturers will tell you. Most people don’t we talked about before, there’s just no way we’re going use the wi-fi features on their frames today, but it’s to offer the service for free. Although if you assume certainly something that we expect to happen. This is that sensor sizes on cameras only increase to a certain certainly true if you talk to the Soviet ministries, aka level, and then they don’t increase any further, and if the cell phone carriers. You want to know – and you ask you assume that storage continues to go down in price, them, “I want to be on the deck, and I want to be in and if bandwidth continues to get cheaper, you could your device and push the photos to your service.” If you someday, someday you should be able to offer Phanfare don’t have a large reach, they don’t care. for free to everybody. For all these reasons we thought we needed to aggregate Why don’t we just cost control the people who want an audience, even if we hoped to only make money on

Subscription Offer Strategy, Part 2: Going Viral

the paying users. whether they were using it for business. This is what the 2.0 system looks like. This is my If they were using it for business, we put them on a own personal dashboard, and it’s sort of out of focus. separate list and didn’t move them to the 2.0 system Basically it shows a bunch of albums on the left. The immediately because we knew they were going to recent is a montage of photos changing in the center really be unhappy. Real estate agents find the idea of that is fed from my friends and family, and then down friending their potential customers before they can see the middle is a news feed… their photos to be a problem. Same thing with anyone else using it for business. For instance, the first one is from my child’s day care, which uses the system and pushes photos privately to So what happened with this? Well, what we found out all the parents. Then there’s – now there’s information is that customer acquisition costs fell dramatically to about who viewed your albums. Since everyone’s about $30 per user. We’ve lowered our keyword spend registered, we can tell you who viewed your albums. So, to about $5,000 a month on Google. In about the 12 or you get some feedback that way and you actually kind 14 weeks since we’ve done this, we have about 100,000 of know what they looked at. There’s a contention there registered users of the 2.0 system. Now the challenge, if you give too much information it becomes oppressive of course, is turning these people from viewers to for the viewer. They feel like they’re being watched too creators. closely, so you have to kind of be careful. Basically Frankly, this talk was renamed by the MarketingSherpa this becomes your console, your dashboard, to find out folks calling it Go Viral. That’s not what I wrote. What what’s going on around you from a photo and video I wrote is Lowering the Customer Acquisition Costs of standpoint. What we were going after with this was Subscriptions. It’s going to be really exciting if I could almost like micro-blogging or Twitter. tell you that it was going viral, and that every user We thought, “Really I don’t care about your photos. was adding one additional user. The truth is it’s not My friend went to the zoo. I hardly care. I’ve been to going viral yet, and it’s still a challenge for us. The the zoo a hundred times. I know what the animals look truth is that people accept the invitation to connect like, but I want to know they went to the zoo. Maybe I with their friend 50%, and that the rate of them adding want to see one photo so I have that context to have their own content isn’t as high as we’d like it to be. a conversation with them the next time I see her. We We’re trying to look at that now and figure out how do kind of believe that people want to be somewhat, but we increase that engagement level to move you from not really, engaged in their friends’ personal photos and that next step which is from being a viewer, a passive videos. viewer? Everyone has at least a photo or two they can share, and we know that. People like to show this stuff, but - like if you walk into your friend’s house and they bring out a paperbound We know that if we can get them more engaged and album and say, “I just went to Costa Rica. I’m going to lower the friction that they hopefully will become show you every page, and I’m going to turn the pages,” I more engaged in the whole system. A lot of the social mean you’re pretty much hoping that they have a bottle networking features that we’re adding are sort of a copy of tequila in their other hand to get you through that, of Facebook, frankly. The hypothesis behind this is that because it’s going to be tough. We’re really conscious of families are not going to want to share their photos in that and that tension between wanting to show people the place of Zombie Armies and Super Poki, but if that things, and then being somewhat, but not extremely, turns out to be untrue, then we’ll of course have to zig interested in seeing them. and zag in some other way. We’re a start-up and we understand that. Here’s my album after it was rebranded by the 2.0. We put this banner across the top, “So now you’re in the We’ve hedged our bets just a little bit. A lot of people Phanfare network.” We said, “Wow, that’s going to piss have someone in their family that’s younger than them off some people.” And it did. I mean, it did piss off that uses Facebook. So, you can publish your stuff to some people. We went through every single one of the Facebook today if you want, and we have an app to do accounts before we went over to this conversion. We that. called it the Ministry of Truth, sort of Orwellian Ministry We’re paying a lot of attention to inputs and outputs. of Truth, and figured out whether it would just – you We released a thing yesterday, you can show your photos know, in ten seconds whether we could figure out

Subscription Offer Strategy, Part 2: Going Viral on a PlayStation 3 or an Xbox 360 in your living room. Andrew Erlichson: That’s a very astute question. I Now we’d love to be on picture frames. We’re looking at mean, one of the differentiators was that if you wanted the iPhone, we’re looking at other devices and how we a hosted approach where you were completely separate can make photography better for consumers. from everybody else, there’s one other company that does it today, which is Smug Mug, which is sort of I guess the things I learned in this gradual process, family-owned and wants to stay small. for me, was that marketing is incredibly expensive, and that if you are hoping to sell a subscription on the net We certainly – we did, we gave that up, and it was hard. – which I think most of the times makes no sense, by It was an evolution in terms of our thinking, too. This the way. If you look at Porter’s competitive strategy was a market that was interesting to us, because we you say, “Well, there’s going to be two players that are were users of the system. All of our friends and family profitable. It’s the guys with the premium product and put stuff on the system. We care about it very deeply. the guys that have a low cost position.”. We just felt that it had become sort of stale in terms of, “Yeah, I’ve got this vanity press that no one knows how The premium product, which nobody else can offer what I created it, and they think I’m some sort of a magician, they have, and you have some price control. The guy but it’s just not very collaborative.” with the low-cost position because when you have a price war with him, he always lowers his price and you You sort of see how much more collaborative a system lose. The guy with the low-cost position usually has the can be when you look at, let’s say, Facebook. You say, majority of the market share. “Wow, we have these fantastic assets.” We have the best photo- and video-sharing system in the world. We You see this with Apple. Apple has 5% of the market. have desktop clients that sync on Mac, and PC, and we Steve Jobs likes to point out that’s more than BMW have full version control so that you can go back to and Lexus and Mercedes combined, but it’s 5% of the your original image anytime. We have video support. market. We support four different bit rates for grandma. We test So if you’re thinking about selling subscriptions on the your connection speed and figure out how fast your net, I think you have to realize that it’s going to be a computer is before we decide how large a video we’re small business relative to some larger business which going to serve. We have all these valuable assets and is probably being free. There are many reasons why it yet, it’s just being squandered on, really, too small a may make sense to do that, to sell subscriptions. It market. So we did, we gave that up. might be the cost of providing the basic service, or it’s Something else that’s interesting about this registration. the only place you think – it’s an interesting place to When we first decided to do the registration, we wanted, be in the market. It isn’t the worst idea to figure out we made this decision in June of last year, about a year something you can give away for free to try to prospect ago, and we looked at how we were going to register for people that are actually willing to pay something for people in, and we were thinking about lower friction, your service because without that, it’s really a needle lower friction. So we copied Genie’s registration system. in a haystack problem. And Google is a pretty expensive I don’t know if any of you are familiar with Genie, or way to find those people for a lot of services. if Genie sort of burned through you at one point or That’s about it. another. We thought this was so clever, right? Oh my God, it’s great, right? The Genie guys, of course, copied MODERATOR: Thank you, Andrew. Time for questions? the PayPal registration system. It was the most genius Andrew Erlichson: Yeah, I think so. registration system ever. It’s like sign up users by saying, “You’ve got money.” That was genius. Participant: Hi. It seems to me that when you went to your free service, which particularly you require The Genie guys, or the PayPal guys, there’s no surprise customers to sign up in order to view their friend’s they would use it again. The problem is that – so we did and family’s photos, it seems like you lost some of the this. What happens: If you add a friend, we’d actually distinguishing features you had, right, where it seemed email the person, and then we’d send them credentials, like a branded site. So, in the beginning, where you like “Your password is fubarbaz. You can get into the said customers were silos, that was sort of the value of account.” Here’s the problem. Nobody even knew they it. I wonder how you sort of still maintain that in this had an account. Nobody even understood, even if they free model. clickthroughs worked directly to the site, it autofilled,

Subscription Offer Strategy, Part 2: Going Viral

so they don’t have to type their password, there was no not it ruins our identity, I don’t even know. They want buying whatsoever. to open public albums. That’s what they want. If we give them open public albums in the 2.0 model, a lot of By not putting them through that registration process, them don’t care about the banner on the top. Like, “I they didn’t feel like they were members. They didn’t don’t care. I don’t care about that. I’m not – but I need think they were going to add photos. They didn’t think it to be open.” they were going to do anything. They just thought that they were here to see their friend’s photos. So, we’re working on that, but we kind of – part of it is this incredible guilt to be abandoning a customer. We completely backed off this system because, although We’re not sure whether it makes sense for the business you could claim that – I mean – the clickthrough rate to be doing it, or whether we just feel so guilty to was very high. It was like 70% to 80%. Confirmed be abandoning them that we’ll do almost anything to registrations, right? We send them an email, “View John’s figure out how we can morph ourselves into something photos.” They click, that confirms the registration. We they can continue to use. We don’t know, I guess, is the know the email worked. That’s a closed-bit confirmation answer right now. We just decided to extend them to right there. The email got to the person, and then they August. You can see the direction it’s going. have credentials. Of course, they don’t have their own password, and they have no idea they’re registered, so Participant: Nice presentation. Thanks. For the banner good luck. They had absolutely no buy-in whatsoever you put in the 2.0 system, do you think about having a of being a member of this service. Then we went to the premium option to remove the banner? Like $20 to get system that actually explicitly asks them to sign up and rid of it? If you haven’t, why not? register with full eyes open. Andrew Erlichson: Well, we thought that – it’s Your point is absolutely correct, which is that we did kind of like are you a social network or are you not? give up some of the differentiating factors, and we If you’re a social network, then the idea of paying to now need to figure out what those new differentiating remove the navigation at the top of Facebook is like, factors are to continue to grow. that seems like a silly idea. Obviously it’s going to be a media network. It’s going to be advertising. You have to Participant: I think you guys are great, proof positive of increase engagement. how social media works for business, but you mentioned something earlier with your B-to-C customers and your On the other hand, if you’re going to be wordpress.com, real estate agents that are on the site. Do you have a which is a hosted version of the WordPress blog, then, similar plan for them, or what’s going to be your longer- yeah, that’s what you would do. You’d say, yeah, it’s term plan with that group? like create your free site, right? It looks kind of like this. This is free, but if you wanted to pay us a la carte Andrew Erlichson: Right. A lot of them told me that a few dollars, we’d remove the top nav. I think that they’d pay three times as much for the service. OK, so would be an acknowledgement that it’s just still going obviously we’re idiots. We knew that. The obvious way to be silos, and that we’re just trying to get some free to segment it was consumers, prosumers and pros. If you marketing from the guys who are too cheap to pay us to think the whole thing is the size of a breadbox then you remove the branding. It didn’t seem like it would be a certainly would segment it that way. If you hoped that big business, honestly. That’s kind of why we didn’t go one of them was bigger, you wouldn’t distract yourself in that direction. by doing the – by trying to run a B-to-B company and a B-to-C company at the same time. Actually, what we’re working on right now is actually filling out the profile information. We think, well, if it’s We’re 12 people, so the idea of keeping both systems kind of like those offers on the street you see in New up and running makes our engineers pretty nauseated. York. Give me one penny. If you could just break that Right now, we have 3,000 people – 2,000 people sitting one penny barrier maybe I could get more money from on the 1.0 system, and we’ve got to figure out what we’re you. So, everyone has one photo. If we can get them going to do with them. We could move over to another to put up one photo and increase their profile, maybe service; we could just shut them down. We know what that’s an easier way to get involved with the system to give them back. It’s an interesting question, right, before you actually upload photos and videos. which is so we can give them back some of the things they wanted and they’d be perfectly happy. Whether or We’re also mostly giving up on the desktop clients. I

Subscription Offer Strategy, Part 2: Going Viral mean, four years ago, we were able – we thought, oh to just basically purely Web-based software. wow, we can really increase the level of interactivity and Sorry, if that was crazy off topic. I thought this audience all that by doing a desktop client and give people a level probably doesn’t know jack about that stuff and that I of immersiveness and background uploading. People could give you some truth about the way this stuff is don’t want to download software. That’s craziness. It’s actually working on the web right now. just too hard. The new system uses a Web-based client, using Ajax. It actually uses the Yahoo toolkit. Any of you Participant: First of all, my family uses Phanfare, and have websites, I’d highly recommend you look at that thank you very much. It’s great. My question is around toolkit. It’s fabulous. We evaluated, and we’re geeks, sort of strategics, since you brought up Porter. Your so we evaluated it pretty hard. We evaluated using the end game, is it to sell as you’ve done successfully in Google toolkit, which is what they used to use to create the past, which is amazing, or is your end game to go gmail. We evaluated using the Yahoo toolkit, which is public? what LinkedIn uses, and a few other companies – the Yahoo toolkit is better honestly. The underlying question really has to do with successful companies and features, and the correlation between What the Yahoo toolkit is is a bunch of glue code so the two. If you look at the street, and you look at the that you can do things like drag and drop, and all these features of a particular product, or you look at Consumer other things that you expect from desktop applications, Reports, and you try to correlate feature superiority but do them on the Web and, basically, bring that with capitalization or successful businesses, it’s not event loop because the whole problem with Web based necessarily correlated. software, circa 1995, is the event loop is up on the service. Every time the user clicks, that’s a roundtrip Andrew Erlichson: Right. Look, we’re late to market to the service and it’s very clunky. What Web 2.0 is in the photo- and video-sharing space. If you want from a usability standpoint is, it’s bringing the event to create a dynasty, you typically have to be early to loop of the graphical user interface down to the client, market and ride the wave of a changing marketplace. basically running the GUI inside the browser. This marketplace may change if all photo- and video- sharing goes to the cell phone, and people become The problem is the Java script was written by wolves. It’s accustomed to paying subscription fees for their primary the most arcane, screwed up mess you’ve ever seen in photographic device. You can imagine the market shift your entire life. If you went and tried to build anything that would put us well positioned. that was usable using Java script, and people said, “I’m not going to feed you until it happens,” you’d be dead. Barring that, it seems very unlikely that Phanfare What happened over time is eventually people created becomes a public company. If you want to create a these toolkits that bring together these huge amounts dynasty, you probably want to be early to market. The of junkie, crappy, Java script code that are compliant most likely scenarios are that it gets acquired by a with the four browsers you might care about, and if you larger player or that it’s just run profitably as a private use those toolkits, you actually can build something in company. a finite amount of time. That’s what we did in the new We took $2.5 million of venture capital from Azure version. Capital in San Francisco in October. They did Bill Me We’re finding that only a third of our content creators Later and VM Ware as some of their investments. Those are now downloading the client, even though until guys’ interest in holding stock in a permanently private tomorrow morning there was things that you could only company is probably about the same interest they have do in the client, like upload your own music from iTunes as having one of their kidneys removed. So, I think that to your slideshow, and change the style of the site. Only that pretty much eliminated that option when we did works in the client. Even then they’re like, “No way. I’m that. Prior to that it was angel funding out of some just going to use the Web.” It totally makes sense in the New York investors that certainly could have stayed 2.0 version, right, because you add a friend, they get an private forever and it would have been fine. They’re like invite via email, they click through, they see your site. Evergreen investors. So, most likely that’s kind of where You want them to be one click away from adding content, it goes, unless something changes. not one click away from download this .net executable One thing that I really wanted to do with this company – and by the way, you don’t have .net, so download the personally was create something of lasting value, 29 megabyte executable from Microsoft. We’re moving something that was going to be around a long time. It

Subscription Offer Strategy, Part 2: Going Viral

was personally very important to me. I was putting all was it. There is nothing left from that company. It is my photos and videos there. The one thing I really liked just zero, zilch, nothing. I guess Google owns the stock, about the 1.0 model is that I always knew it could exist. technically, but there’s not much there to talk about. So So we got $54 of revenue per user, and we had $25 of we would really like to see this be a lasting contribution costs. We knew that if we had to, we could fire everyone in some way. and my co-founder and I could go get other jobs and it MODERATOR: OK. Thank you, Andrew. I think we’re going could run sort of by itself and it would throw off cash, to have to rename the title of that speech again. We’re and it would never need to go away. We wanted to run breaking for lunch. it in a way that it would never, ever be threatened to go away. 2.0 I think is a little bit scarier that way since we are offering a free level of service. But we do want to build something of lasting value, and we’re very hesitant to sell it to an acquirer for technology parts because we want – if it’s a business throwing off cash, no one destroys that, right? They run it, they nurse it. If it’s just a bunch of technology parts, well then they’ll just – they don’t care. I mean the last company – the last one was for money and this one is for love, if you will. We did fine in the last company, and so we did this because we wanted to create something of value. DoubleClick destroyed and turned off everything we did at FlashBase in under six months. We were acquired in 2000 for $25 million dollars. They used cash because they thought their stock was undervalued at $70 a share. We didn’t know that wasn’t true at the time so we were OK with it. It was actually an installment sale. They made forward payments in stock at $5 a share. They realized that maybe there was no lower bound to the stock value. We got there in 2000 and they laid off like 500 people two weeks after they got us. A year – we were bought by the media division, the one that used to rep Websites, the DoubleClick Model 0, Network Zero it was called. We were bought by them. Wenda Harris Millard’s group – Wenda, a big, heavy hitter. She’s like going to sell your stuff to brand advertisers. She went to Yahoo to run their ad sales. Wenda bought the company, and then she fired half of her ad sales force, then they spun out – then they sold the entire repping business of repping websites to somebody at DoubleClick, leaving only the technology business of serving websites, interestingly. FlashBase was so small, they just shut it down, and then they lost the code. I got a call a year ago and someone said – this was right before the Google sale. Someone said they wanted to put their ducks in order, like where’s all the shit? So they said, “Do you know where the code is for the all the stuff we – . “ I was like, “I told you the day you turned it off, you were never going to find it again.” It’s just like you lose the ability to make fire. So that

Subscription Offer Strategy, Part 2: Going Viral

Subscription Offer Strategy Part 2: Going Viral

Andrew Erlichson, CEO Phanfare Inc. Tuesday, May 13, 2008

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Phanfare History

 Founded 2004

 Premium photo and video sharing

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Subscription Offer Strategy, Part 2: Going Viral

Phanfare 1.0 Web Sites

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Phanfare 1.0 Desktop Client

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Subscription Offer Strategy, Part 2: Going Viral

Phanfare 1.0 Offer

 30 Day free trial

 $54.95/year for unlimited storage

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Phanfare 1.0 model

 Web hosting model

 Phanfare never stands between users and their viewers

 Each user is a silo, unaware of every More data on this topic available from:: other user

Subscription Offer Strategy, Part 2: Going Viral

Phanfare 1.0 Customer Acquisition Methods

 Keyword advertising

 Referral Program (up to 1 yr free for getting a friend to signup)

More data on this topic available from::  Word of Mouth

Phanfare 1.0 Networks Effects?

 Very little economy of scale

 Phanfare’s value to nth user not proportional to n

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Subscription Offer Strategy, Part 2: Going Viral

Phanfare 1.0 Customer Acquisition Costs

 In April 2007:

. Cost per paid conversion of $175.00

. Cost per conversion (fully blended) $45

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Re-inventing Phanfare

 Linking (social networking) replaces password protected sites

 Free level of service

 Service markets itself to potential users

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Subscription Offer Strategy, Part 2: Going Viral

Phanfare 2.0 Workflow

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Phanfare 2.0

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Subscription Offer Strategy, Part 2: Going Viral

Phanfare 2.0 Web Albums

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Network Effects!

 Customer Acquisition costs fell to $30/user

 More defensible at scale

 Phanfare more valuable to the nth user

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Subscription Offer Strategy, Part 2: Going Viral

Things I learned

 Marketing is expensive

 A free level of service can help do prospecting for you

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Credits/Thank You

Andrew Erlichson Phanfare Inc. www.phanfare.com 732-476-5961 [email protected]

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The Payments Minefield: A Strategy for Success on a Softening Economy

Session Description: Paul Larsen is a credit card consultant delivering If you think it has been challenging for subscription payments solutions primarily to the card-not-present, merchants to meet recent credit card challenges, recurring merchant community. Larsen has 30 years you may be in for a rude awakening. In the best of of experience in the Direct Marketing industry. Prior times, preventing inadvertent damage to customer to consulting, Larsen was Director of Operations for relationships, caused by credit card ‘issues’, is Synapse Group, Inc., the world’s largest magazine problematic. In a softening economy, replete with subscription company. Consulting clients include delinquencies and shrinking available credit, the Audible, Dow Jones, eDiets.com, Blockbuster.com, potential for future fallout is even greater. This must- Disney, Scholastic and Consumer Reports. Larsen is attend session offers incisive best practices that can also the immediate past Chairman of both the Direct help you meet and overcome the challenges posed by an Response Forum (www.directresponse.org) and Payment uncertain economic and competitive conditions. Processors Association.

About the Presenter About Paul Larsen’s consultancy Larsen’s consultancy helps subscription merchants implement and deploy the best practices that optimize Paul Larsen credit card processing results. Payments & Operations Consultant

PRESENTATION This is the war on your bottom line that is being perpetrated by credit card problems, credit card churn, MODERATOR: Our next presenter, compared to some of credit card mayhem. In this session, we’re going to be the other presentations where we’ve been focused on trying to identify the types of mines that there are so marketing tactics to acquire new customers or retain that you can be on the lookout for those, as well as the customer and increase the lifetime value, and things weapons and the procedures and markers that you can like that, our next presentation is going to sort of flip utilize to hopefully negotiate your way through that it around and focus on an equally important back-end minefield as unscathed as possible. operation for your subscription sales, and that’s the actual payment, the credit card processing component, How many of you recognize that logo? So, therefore, no particularly around recurring billing. Paul Larsen is a one would know what it represents. I got that hat at a credit card payment processing consultant who is going conference much like this, probably seven years ago. It to share with us some really important developments in was a freebie. I like freebies, and I wore it a lot. I liked the credit card processing world that every subscription it. I wore it a lot. There was only one problem and, that business needs to be aware of. is, people would actually ask me what it stood for. For the first few months I wore that hat, I actually tried to Paul Larsen: Nap time. Nothing better than taking to explain it, and I would begin by saying, “Merchants, the stage after lunch on day two of a two-day conference. when they charge customers, they, in fact, get charged The sugar high from your dessert will wear off in about by Visa and MasterCard for those transactions, and 10 minutes and those eyelids will become, oh, so heavy, there’s a fixed and a variable component to that charge, and despite the eloquence of the speaker, you’ll doze off and that’s why, smaller ticket items, even to the profit and suddenly find you’re having a nightmare. And in that margin, actually deeper than big ticket markets, and nightmare, unbelievably, it’s like credit cards exploding that’s why you actually see stores in your local town left and right, and you awaken shaken to find out it’s that say, ‘Credit cards not accepted for purchases under not a nightmare. It’s a reality. There’s a minefield out $15,” which, by the way, as you probably know, is there through which you need to successfully negotiate against regulations for a merchant to actually do that. as a merchant. But, I would actually explain that to folks, and go on

The Payments Minefield: A Strategy for Success on a Softening Economy

to say, “Think about, then, Apple and iTunes, and how blah may have been compromised in a recent security the profit margins for iTunes are really cut for a $.99 breach. We value your membership greatly and we’re transaction when that fixed part takes up such a big shutting your card down and reissuing you a new one.” piece. Yaga came along and they were really one of How many of you got something like that recently, the first aggregators of transactions to be able to send within the last year? through en masse in order to be able to increase the That’s bad news. It’s good news for you as a consumer. margins for merchants such as Napster and iTunes.” You’re being covered. They’re not taking any chances. By the time I was done with this explanation, both myself But it’s bad news for you as a recurring merchant because and the listener were both just thoroughly exhausted, all of the recurring relationships that were based on the both mentally and emotionally, and I realized that in card that is being closed now has to be thoughtfully order to continue to wear that hat, I needed to come moved over to the new card. Not everyone remembers to up with a one-liner that was so opaque, so oblique that do it all, and it’s also a time when people reflect on, “Is we would just move one. So, I did and when anyone this worth me keeping going?” It’s especially hard on would ask, I’d say, “Yaga is an aggregator that processes discretionary spend issues. Of course, we had the T.J. micropayments on behalf of the merchant community,” Maxx breach, which was historic, 95 million accounts and that worked. Eyebrows would raise and then we and, recently, if you live here on the East Coast, you’re would all happily move on to important topics like well familiar with the Hannaford Brothers breach, a fairly baseball. significant grocer up and down the East Coast; nearly 5 million accounts, and those cards have already been The same thing used to face me when I talked about my reissued. It happened so fast this time. We found out consultancy. How many of you feel like you’re challenged about it in late March, and on April 16th, I sat around a to explain to your neighbors, your friends and your table with a client of mine in Danbury, Connecticut, and family what you do for a living? You get that question out of the eight people around that table, three people from the new neighbor and now you have a choice to had already had their credit cards reissued because of make. Do I really tell them or how do I – because it’s this problem. Again, that’s bad news for us. really hard because one question will lead to another, perhaps, and then it becomes encumbering. Reissuance comes when a bank flips its portfolio. The fifth largest issuer of credit cards in the US flipped its So, as with Yaga, I kind of developed a response. So portfolio from Visa to MasterCard. So, we can already really, what I do for a living is help recurring merchants say that if you haven’t invoked any of the best practices understand how to implement the best practices with we’re going to talk about in a minute, we can already the best processor at the best price. So, it’s in that vein say that all of your continuity relationships based on that I come to you this morning, and it’s a treacherous Washington Mutual cards blew up in 2007. Not a pretty time. There’s a lot of not-so-good news as subscription thing. And then you always have other things that are relationships kind of inadvertently implode all around always taking place; upgrading, from green to gold and us, and at a record rate. So, this is not hyperbolic for gold to platinum, and all that warrants new plastic, new me to tell you that relationships are breaking at record numbers, and all of it marginalizes the retention over rates, and you’ll see some of the reasons why. time. We have the economy, which is softening, but we also So, that’s just issue number one. I’ll breeze the others. have seminal events that seem to be taking place all Number two is competition. This is just data that blows too often, and they have a devastating effect on the the mind. 19 billion solicitations have been in your bottom line of recurring merchants, in particular. So mailboxes over the past three years; hard to believe, these relationships are breaking and there’s really five but it’s true. And, you know, that just causes its own major reasons. churn. A new one is taken. That usually becomes the The first reason is reissuance, and there’s many reasons primary, the primary becomes the secondary and all for a reissuance, but they’re at an all-time high. No. bets are off as to what’s going to stick and what’s not. 1 is fraud, and that’s a significant problem today. I So, competition affects the situation. don’t know how many of you have gotten a letter like Credit limits: This is a mind-boggling number, but it’s this, but my wife recently received a letter from her true and it’s consistent and it’s not related to the soft bank that said, “Hudson Valley Federal Credit Union has economy. Fifty million primary American credit cards in been informed that your Visa card ending in blah-blah-

The Payments Minefield: A Strategy for Success on a Softening Economy the US today are within 5% of their credit limits or any of them that actually allow you to be incisive in above, but that has nothing to do with the economy. your processing. In good times or bad, Americans had a love affair with So, we’re going to look at some transactional things credit limits. What is not so harmonic convergence is right now. Some of these things you may be familiar taking place as a result of the economy in which, now, with, some of them you may not. I’ll let you read that credit limits are meeting up with late payments. That’s first. what’s being caused by the economy, so that we crossed a Rubicon in January of this year that’s never been Because of the credit limit situation, because of the crossed before, where the average number of accounts churn situation, and especially because of the soft per individual in the US that are overdue by one payment economy and the delinquency and the late payments, or more is one. We never crossed that threshold before. you’re getting more declines than ever, so you need And I know it’s none of you, so just imagine that some to have a sophisticated and comprehensive decline of them have two or three because none of you do. So recovery program. Realizing this: The declines you can that’s a problem. eventually recover are related to accounts that are still active but need some time to become healthy again. And the fifth, and one of the most important reasons Therefore, retrying, reattempting is not about the why we have this ongoing problem is you, your failure to times you do, but it’s about the time frame over which implement the best practices which can help you meet you perform it, and many of you have a tremendous and overcome the challenges posed by numbers one advantage here because you’re serving digital content, through four. I call it transactional suboptimization. no real cost of goods, so that allows you to stretch it So, let’s look at some of the things we can do. I’m here to out in a way that perhaps book clubs and others can’t tell you that there’s two important facets of being able necessarily do. to battle this breakage well. The first one is relational So, since the average credit card billing cycle is 28 days, and it actually supersedes the transactional because it’s far more effective to reattempt a decline authorization if you don’t have a relationship with a processing three times, 10 days apart, out to 30 days, than it is to partner who accommodates the best practices for recycle them 10 days in a row after the initial decline. recurring merchants, then you don’t have a chance to As a matter of fact, if you were to do it 10 days in a row, being transactionally adept. So, in order for you to be or more than four times in a 16-day period, a., you’ve transactionally adept and to proactively and reactively broken the Visa regs, because you can’t according to the take care of some of the damage, you need to be with Visa regs; b., you have issuers that have put a screen in a processor who can accommodate that. Although there and they’re monitoring your retry, and as soon as you are lots of processors and a lot of them do good work, go beyond the pale, they begin to raise the barrier to most of them try to be all things to all people and very approval of that transaction because they think your few are totally focused on the discipline of recurring. just trying to hammer the system into submission. Not You’ll see today some of the things we’ll talk about only that, many of you are with processors who don’t and all you’ll have to do is ask the question of your give you much granularity in your decline responses. processor, “Do you accommodate this, this, this and If you were with a bonafide recurring processor, you this?” And you’ll determine whether or not you have a get tremendous granularity, you would be able to have processor who you’re going – you have a situation where a strategy for retrying every different kind of decline. you’re going to be successful despite your processor, as Some you would be robustly trying to recover, some opposed to because of your situation. you’d take a very moderate approach and some you A few things you can ask yourself: Do you only hear wouldn’t try at all. But, if you’re with a processor and from your processor when there’s a problem, like with you’re only getting one or two reason codes back, in chargebacks? Have they proactively encouraged you to those reason codes are both stuff that can be recovered incorporate the best practices we’re going to talk about and stuff that absolutely won’t. And the issuing banks in a minute? A gateway to your processor is just another don’t like it when you try to retry accounts that they layer that your transaction has to penetrate. And, as have already told you have no chance to be recovered. it does, it’s probably getting morphed and besmirched Again, all of this goes into the algorithm over time along the way. And most gateways – again, in an effort as they make decisions on whether to authorize your to be all things to all people and accommodate all kinds transactions or not. of e-commerce and retail transactions, I don’t know of

The Payments Minefield: A Strategy for Success on a Softening Economy

Let me give you some case study information. I’m going How many of you do something like this? Again, the to give you three examples of merchants who recycle. most robust approach is to have a P&L on every attempt All of them have been Sherpa attendees in the past. The so you really know where to draw the line. Within those first one is Kramster.com … They just have a $13 price miscellaneous declines, there are declines that there’s point. You’ll see something interesting when it comes only one try at day 10, see what we can get, it’s done. to price points in relation to recovery. The second one is There’s nothing really beyond day 10. And then others a merchant with an average $24 recurring, and the third that go all the way out to day 30. So that’s kind of a one is an average $50 recurring. mixture. You can see that for Kramster – and again, you may not Stale expiration date handling: Might I say, you hope be used to granulatory and declines. These guys all get you have this problem. If you have this problem, that tremendous granularity. I rolled up the miscellaneous means you have customers who are aging on your file, declines that you can recycle and put them into one which is what you want. You want long-term customers. bucket. When it comes to insufficient funds, a classic How horrific it is then when an expiration date causes decline reason code called ‘do not honor’ is like a the relationship to end when neither of you wanted it repository where all sorts of things get thrown into to happen? So, you kind of hope you have this problem by issuers. Miscellaneous declines. This is what they because it’s an indication of your relationship to your see. For Kramster, they see, for insufficient funds, 38% customers, but it’s impossible to solve organically; that recovered on their first retry, which is 10 days after is, to make the number of calls and emails necessary to the initial decline. Then they see another 10% on day recovery enough. 20 and 3% on day 30 for a total recovery of 50% of But the card companies know that and they designed a those declines, and ‘do not honor’ ends up being 21, solution that makes fresh expiration dates moot. They did miscellaneous declines 27. this five years ago. Basically, it’s when in doubt, blank Interestingly, with the merchant that has a $24 price it out. This should render greater than 90% approval point – there’s something, I think, interesting about rate, and then we talk about a little finishing touch we kind of the demarcation line of $25. As you probably can put on it. Now, unfortunately, most processors don’t know – you guys travel a lot. Now it is that you don’t accommodate this. They force you to put a date in, so have to sign for anything under $25, and I think it’s you’re left at guessing at how to increment the stale pretty well corroborated through my experience that date you have on file. But this solution has far greater this tremendous advantage is – there must be some results. demarcation line by some of the major issuers that over Here’s an example. Number two is Kramster, again … $25 matters to them, and maybe under $25 doesn’t, as They use two different processors, merchant number much. one and merchant number two. Merchant number one So, for the merchant with the $24 price point, they asks the merchant, “When you see a stale date on your choose to do four retries, day 8, 16, 24 and 32, and you file, go ahead and send it through, but blank out the see what their effective recovery is. field,” and then they send it through as blank, and they get 93% recovery. Then, my philosophy is after you do Now, you go to merchant number three, $50 a month, that, you’ll have some residual expired card declines and you see that their recovery is less, but still fairly because, five years ago, when this work-around, this significant. And, in fact, each of these guys – andI blank expiration date policy was developed by American didn’t show it – they do a P&L, and this is where you Express, Visa and MasterCard – well, there’s a lot more can really step up. They do a P&L on every attempt issuers on the planet today than there were just five years and every client, because they now – so the guys on ago. So, not everyone, even in the issuing community, the bottom went out to day 40 having done a P&L on is aware of the blank expiration date policy. day 30 for insufficient funds and realized, “Wow, we’re still making big bucks. We only serve digital content. So go ahead – the big guys, Citibank, Capital One, We’re happy to leave it open to the customer for 10 Chase, they all know this. They designed it along with more days, take one more crack and see what we get.” Visa and MasterCard. Send it through as blank, they get Now they’re talking about going out to day 50. I’m not 93%. Then, three days later, for all the residual declines, saying that’s wise for everyone to do. What I’m saying add two years. Increment two years to the stale date is you need to be grappling with this strategy, and it you have on file and you get a little bit more. Wait, should not be one size fits all. take a deep breath, three days later add three years,

The Payments Minefield: A Strategy for Success on a Softening Economy take a deep breath and then add four years. And there’s have significant impact. what you see: 98% recovery or greater, what was stale MasterCard has fewer issuers participating in their expiration dates on file. program, but it’s interesting, if you look at both this See, Visa and MasterCard recognize that everyone one – OK, so you see the updated accounts from Visa, loses if you’ve got to proactively go out and get fresh 2.2 and 3.9, versus 4.9 and 5.1, and you say, “Why information from your customer because you just can’t, would MasterCard have more updates?” That’s because especially for discretionary expenditure. the Washington Mutual flip was accommodated in the MasterCard Updater program. So that flip is still ongoing. Number two is Kramster. Basically, their processor It went through all of ‘07, the first part of ‘08. So that’s says, “Go ahead. You send through the stale date. We’ll where that’s covered. So, if you were in the MasterCard recognize it, strip it out, and send it through blank. So Updater program, if you were participating in it, all of no muss, no fuss. You don’t have to worry about it,” and the relationships that you had with customers based on you see what their recovery is. Net/net, they both come Washington Mutual cards would have been seamlessly out to the same result of 98% recovery. converted for you, rather than imploded. How many of you are doing this? OK. You’d love to get How many of you are using Account Updater? It’s not the those dollars back into your pocket, wouldn’t you? When end all, but it’s important and it’s not expensive. This is you move to this, you just have to be – you don’t want what makes it so great. There’s a one-time enrollment to look back and rue what you let go away. How many of fee, and then you just pay per update you receive back you are frustrated by the expiration date problem? And and it’s less than a quarter each. You’d gladly pay a the solution for it was developed five years ago. quarter for fresh account information that keeps your All right. Now we have managing churn. Unlike information alive. expiration date problems, where you wish and hope you Other effective tactics: Continuity Building from have that problem, with managing churn, you wish you American Express, especially from B-to-B, hybrid didn’t have this problem. These are actual headlines B-to-B, and even B-to-C. If you’re a recurring or that I took from either the Internet or from newspapers. subscription merchant, you should be enrolled in the “TJX breach could top 94 million.” “Hannaford breach Continuity Building program. That’s where American exposes 4.2 million accounts.” “WaMu’s move to Express manages the churn for you behind the scenes. MasterCard underlines intense card competition.” This No IT work required. You just have to be approved and one is from January and I don’t know if anything’s going accepted into the program. I’ve never seen less than a to come of it – “WaMu has discussed merger with J.P. two percentage point increase in approval on American Morgan Chase.” Express by joining Continuity Building. Again, Visa and MasterCard recognize that your The Recurring Indicator. The Recurring Indicator was customers have developed a relationship with you developed the same time as the blank expiration date through an issuing bank and the fact that the issuing policy by Visa and MasterCard for two purposes: 1. As bank has issued new plastic, that same issuer, shouldn’t an alert. You should be using this in every one of your mean that your relationship ends with your customer. recurring transactions. It goes through the system to the So, they developed something known as the updater issuer and alerts the issuer that, hey, you know, there’s programs. The Visa and MasterCard updater programs downstream revenue associated with this transaction. provide, through your processor – so the processor is the You may want to think twice about declining it. So it’s host. So, through your processor, they provide refresh used as an alert. And also, it’s used in tandem with account number and expiration date information. the blank expiration policy. So, you need to have the This is two first quarter OAs. So there’s fresh information blank expiration policy and the Recurring Indicator from two merchants who use Updater. I’ll explain it. together. That is what makes the blank expiration date Merchant number one sent 265,770 accounts through so effective. their processor to be scrubbed in the first quarter. Now, dynamic billing descriptors help your customers They received back, in total, 17,163 updates, of which understand what they’ve purchased, reduce customer 5,898 were new account numbers. Now, granted, that’s service, and clarifies the purpose and, hopefully, drives only 2.2% but what we’re talking about is an array of down refunds and chargebacks. solutions that you need to provide and, together, they

The Payments Minefield: A Strategy for Success on a Softening Economy

Strategic authorizations. A lot of you do free trials. A the industry luminaries was asked about the future of lot of you have been doing dollar pre-auths to qualify credit card payments, and he said, “The only constant customers. That’s good – it’s against the rules, but it’s in the credit card industry is change. What we now good and I always recommend it, and it works, except term the card transaction industry is like the Chinese now in this day and age of debit, that dollar is often symbol for change, opportunity and chaos. Successful visible, even though it’s just held aside. People are bottom line performance will come to those that seize checking an online banking situation every day on their the opportunity while managing the chaos.” checking accounts and seeing those dollar pre-offs. And I know that this is actually true because I know Have any of you ever seen that? some head-to-head competitors in particular verticals, So, Visa is going to be coming out with the new zero the number ones and twos, and you can see the gap pre-auth. But, again, your processor has to be able to widen between the two of them over time. And, yes, it accommodate for you. Hopefully they will. So strategic could have been marketing, but a lot of it had to do with authorizing. If you serve an annual subscription, successfully processing, managing the chaos because there’s no need to wait until the billing event on that they had a processing partner who could help them with anniversary date to find out if the card is going to be all these things. The other one was floundering with a good. Do a pre-auth 30 days before billing so that you partner who had none of these weapons available, and have a head’s up on what’s going to happen and you can it just caused the gap to widen. So, I do believe that get to take action sooner on what you know is going to that bottom paragraph is true. With that, I will close, hard decline on the anniversary date, to try to prevent and if there’s time for questions, I will certainly take the break in the relationship. them. Gift card balance field. Another new product that’s MODERATOR: We’ve got time for questions. coming out. None of you right now have any view Participant: I have a question, and it’s about the into your recurring relationships and how many have alternate payment methods. Given how difficult it begun with, and begun on a gift card, a limited-use is to test – because of all of the issues you have in card. Most of my merchants have a sense that it’s fairly testing in your site upflow, how much of a difference significant and it’s contributing to the breakage. Visa ultimate payments would make. What’s another way and MasterCard are coming out with a gift card balance of determining whether having PayPal or e-checks, or field, so that when you go to authorize and youget whatever, is going to help? The second question I have a decline, if it’s a gift card, it will actually show you is knowing – it’s actually a different question, honestly, the value that’s left in the gift card that was used in but with Bill Me Later, we have a recurring billing attempt to purchase your cart. So, at least you’ll be model, but I’m still looking at being able to give people able to get some knowledge and information about the a value proposition of, “You know what? You don’t have percentage of your file that is on gift cards, and you to pay now and we can extend our initial duration of can even choose – I have merchants who are all set, that commitment.” So is there a way to easily migrate who actually get that information back, and if they’re them to a recurring billing model after we’ve gotten serving a $28 thing, and they get a gift card response them to sign up for six months? and they see there’s $26 left, they’re going to be happy to take the $26. They’ll turn around and take it and Paul Larsen: I have lots of friends with Bill Me Later, then they’ll communicate with their customer in an and they’re the first ones to tell me that their business intelligible way. is growing so rapidly because of their engagement with the airlines of this world and other on-line single sales Then, of course, there’s alternate-payment methods. Not retailers that they just haven’t had the opportunity to that many right now work well in a recurring relationship. focus on recurring. The two recurring merchants of mine Bill Me Later doesn’t really work in recurring, but PayPal that tested it have not proceeded with it. Maybe they certainly is and so does electronic checks. So those are will be able to figure it out but, again, if it’s going to be just some of the other effective tactics you can use, and recurring, it’s the re-extending of credit on a monthly it’s all about chipping away, chipping away, chipping basis. And, for some, it’s also that hurdle of asking for away at the problem. that extra piece of information – social security and So, in the April 10th issue of Green Sheet, which is kind date of birth ... of an insider’s look at the credit card industry, one of

The Payments Minefield: A Strategy for Success on a Softening Economy

You’re other question, how do you know whether settlements take place two or three days later, and they another payment method is viable for us, well, you do come back to you as returns, which are like chargebacks, need to think of three things. You obviously read and and the fees are not inexpensive. So I think you need understand that payment method to the best of your to know your customers and know the product well. If ability and talk to your processor about it. Number you’re a merchant in a thoroughly middle America file two, understand, really, the penetration of it. So PayPal that’s used to serving a community who is primarily didn’t make sense for the first three years or four years check pay, and your business is primarily check pay, because all of the transacting took place within the moving some of that to e-check makes sense. You’ve got eBay paradigm but, of course, that’s not true anymore. to really explore those options. Of course, that has advantages, PayPal, because there Participant: I had a question about the retry rate. are usually dual payment methods backing it up. But You had 10 days. Is that a best practice for 10 days? the tricky part is, if you go through your processor, I noticed one of the examples had 8 days. Is there a you have to segue in your registration out, directly to thought about that frequency? PayPal, or you have to construct a separate processing relationship with them. Each of them is encumbering. Paul Larsen: Yeah. I’ll be honest with you. A lot But the clients of mine that have begun to use PayPal in depends on your deal with your processor. If you’re recurring are not unhappy with it at this point. paying significant authorization fees, then of course, you have to be circumspect about authorizing. So what Participant: Can you give us a quick overview of the we’re looking at here is the bottom line. How much does processors? Who are the best ones from your view in it cost for me to auth and how much recovery do I get? dealing with organizations like ours? And ,again, a lot of it is testing. I do have merchants Paul Larsen: I will absolutely do that in private. I that have really good deals. They’re big and they hardly would just say that there’s only – you could count on pay anything for authorizing and they – every 4 days one hand. The good news is that the ones that do it, do out to day 60, and they can afford to do it. They’re it well, and your peers, many of whom are here today, not paying that much for authorization. So, you have recognize who those champions are and have gone to kind of look at it that way. The more the merrier if to them. In some ways, they’re driven to support you you can afford it, but you have to be careful. More and by virtue of the leverage that’s applied. So wherever more, Visa and MasterCard are looking out for merchants Amazon is, or wherever Netflix and Blockbuster are, who manipulate; manipulate transactions to add to although you might be a smaller fish in that pond, you the denominator so that they don’t have chargeback get to draft on all of the advantages that Amazon and problems, and you just have to be careful. In this day Netflix force on that processor to put in place to make and age, you want to be judicious. sure that no stone is unturned in finding the weapons Visa – and a lot of you guys didn’t even speak of that can help, the tools that can help. But I’d be happy this issue, but a lot of quality merchants with great to talk to you about that. reputations have been rendered almost impotent by Participant: Are you seeing the same types of problems constructing affiliate relationships and getting involved with e-checks or auto-ACH as you do with a credit in incentivized marketing with free iPods and the like, card? that have just caused devastation. So, again, the card companies are looking to ratchet down fraud, both from Paul Larsen: Well, certainly e-checks have an inherent the customer’s standpoint and from the merchant’s problem, and that is there’s no true authorization, and so standpoint. you have to wait until the transaction floats through the ACH system, and then two or three days later, the reality Participant: I’d like to know your thoughts about of the condition of that checking account happens. At going forward – and it’s not current right now – but first, people are fairly put off. They’re used to the credit biometric payments, and what type of process may be card world where you get an auth – if it’s good, you can in your forward thinking of that, and how we might pretty much count on that authorization providing a have to change, and how close we might actually be to settlement. That is absolutely not true with electronic biometric payments? checks. So a lot depends on your demography and the Paul Larsen: It just took a huge step backward deal that you have with your processor, because where because the biggest biometric payment company went the costs really escalate is when those unsuccessful out of business. So I honestly don’t know what’s going

The Payments Minefield: A Strategy for Success on a Softening Economy

to happen there. To be honest with you, it looks to me like that’s going to take a step back and have to be reassessed, whether or not the appetite is there for that kind of payment method. Participant: Is it legit to treat debit card bin ranges differently than non-debit card ranges? Paul Larsen: It is against the regulations for you to discriminate against any brand. So the relationship that you sign, the contract that you sign with Visa through your processor says that you won’t discriminate against any Visa brand, which is why you can’t really know gift cards up to this point in time. Does that mean that there aren’t processors who aren’t sharing information with merchants? Certainly they are. How do you think it is that you step up to the checkout line at Wal-Mart, and if you swipe a gift card, your PIN shows up on the screen? It’s definitely happening, but in that particular case, it’s been rendered by the courts as not discriminating because they’re not going to deny the customer to use that ability. They’re just going to try to segue them to PIN, which then travels down a different set of rails to be approved, which is a lot less expensive for Wal-Mart. But as far as being able to block a sale? Participant: No, I meant more from a retry. So if I know it’s attached to someone’s checking account, I want to retry on the 2nd and the 16th, after they’re paid, versus just for instance. Paul Larsen: Right. One would think that on the 2nd and 16th, you should go for the gusto on recycling debit. Now, problem number one is you don’t know which cards of yours are debit. Number two, if you have a good rhythm going, you probably cover it anyway, but I definitely do have merchants – I have one who does an extensive study of what’s in customer’s checking accounts for debit cards to be able to hit, and clearly the last two days of the month, there’s the last amount of cash available to customers. But it’s hard to create a strategy that’s one size fits all if you don’t know what the makeup of your file is.

The Payments Minefield: A Strategy for Success on a Softening Economy

The Payments Minefield: Developing a Strategy for Success in a Softening Economy

Paul Larsen Payments & Operations Consultant

MorTe dautaeonsthdis taopyic , May 13, 2008 available from::

More data on this topic available from::

The Payments Minefield: A Strategy for Success on a Softening Economy

The Payments Minefield

First,

The Bad News More data on this topic available from::

The Payments Minefield

Subscription relationships are inadvertently imploding at a record rate.

WHY?

More data on this topic There are 5 major reasons: available from::

The Payments Minefield: A Strategy for Success on a Softening Economy

The Payments Minefield

Reason #1 - Re-issuance

. Fraud – Hannaford, TJX

. Flips – WaMu

. Upgrades

. Cannibalization More data on this topic available from:: . Mergers & Acquisitions

The Payments Minefield

Reason #2 - Competition

The number of credit card mail solicitations made in the past three years:

More data on this topic 19 Billion available from::

The Payments Minefield: A Strategy for Success on a Softening Economy

The Payments Minefield

Reason #3 – Credit Limits

The number of credit card accounts within

5% of their credit limit – or above:

More data on this topic available from:: 50MM

The Payments Minefield

Reason #4 – The Economy

The average number of accounts per individual that are overdue by one payment or more:

More data on this topic available from:: 1

The Payments Minefield: A Strategy for Success on a Softening Economy

The Payments Minefield

Reason #5 - YOU

The failure to implement the best practices which can help meet and overcome the challenges posed by #1-4

Transactional More data on this topic available from:: Sub-optimization

The Payments Minefield

So, here are the Big 5 again:

 Re-issuance  Competition  Credit Limits  The Economy  You - Transactional Sub-optimization

More data on this topic available from:: What to do about it?

The Payments Minefield: A Strategy for Success on a Softening Economy

The Payments Minefield

There are Two Major Components to Processing Excellence:

 Relational

 Transactional More data on this topic available from::

The Payments Minefield

 Relational – Succeeding because of your processor-relationship, not despite it. Your processing paradigm is faulty if:

• You only hear from them when there is a problem – like with chargebacks. • They haven’t proactively encouraged you to incorporate the best practices you will hear about next.

More data on this topic • You use a gateway to get to your processor. available from:: • You pay a “discount rate” instead of “interchange pass-through”.

The Payments Minefield: A Strategy for Success on a Softening Economy

The Payments Minefield

2. Transactional – Wise subscription merchants implement the following best practices:

More data on this topic available from::

The Payments Minefield

Comprehensive Decline Recovery Tactics Declines that you can recover through authorization re-trying are related to accounts that are still active but need some time to become healthy. Therefore, re-trying is not about the number of attempts to recover declines but about the timeframe over which recycling is done. Since the average credit card billing cycle is 28 days, it is far more effective to re-attempt a declined More data on this topic available from:: authorization 3 times, 10 days apart, out to 30 days after the initial decline than it is to recycle them 10 days in a row after the initial decline.

The Payments Minefield: A Strategy for Success on a Softening Economy

The Payments Minefield

Strategic Decline Recycling Case Studies Merchant #1 - $13 Total Decline Type Day10 Day20 Day30 Recovered Insufficient Funds 38% 10% 3% 51% Do Not Honor 16% 4% 1% 21% Misc. Declines 18% 6% 3% 27%

Merchant #2 - $24 Total Decline Type Day8 Day16 Day24 Day32 Recovered Insufficient Funds 40% 12% 4% 2% 58% Do Not Honor 17% 5% 3% 2% 27% Misc. Declines 15% 7% 3% 2% 27%

Merchant #3 - $50 Total More data on this topic available from:: Decline Type Day10 Day20 Day30 Day40 Recovered Insufficient Funds 15% 5% 4% 3% 27% Do Not Honor 10% 5% 1% - 16% Misc. Declines 10% 2% - - 12%

The Payments Minefield

Stale Expiration Date Handling  You hope you have this problem.  But it’s impossible to solve it organically.  The card companies know that and designed a solution that makes fresh expiration dates moot. When in doubt, blank it out! This should render greater than 90% approval rates. Adding a finishing touch (which I’ll explain), should More data on this topic available from:: get you to 98%.

The Payments Minefield: A Strategy for Success on a Softening Economy

The Payments Minefield

Expiration Date Optimization Case Studies Stale Date Handling Total Example Blank +2 +3 +4 Recovered

Merchant #1 93% 2% 2% 1% 98%

Merchant #2 91% 6% 1% 0% 98%

More data on this topic available from::

The Payments Minefield

Managing Churn  You wish you didn’t have this problem. But you do.

TJX breach could top 94 million accounts Hannaford breach exposes 4.2M accounts WaMu's Move to MC Underlines Intense Card Competition WaMu Has Discussed Merger With JP Morgan Chase

 It is impossible to solve it organically.

More data on this topic  Visa and MasterCard know that and designed a program that available from:: provides fresh account #s (within a brand).

Account Updater Programs

The Payments Minefield: A Strategy for Success on a Softening Economy

The Payments Minefield

Visa’s & MasterCard’s Account Updaters Case Studies Updater Performance (Q1 ’08) Example # Submitted # Updated (CC#) % Updated

Merchant #1 Visa 265,770 17,163 (5,898) 6.45% (2.2%) MC 51,866 4,590 (2,553) 8.85% (4.9%)

Merchant #2 Visa 28,287 3,104 (1,104) 10.9% (3.9%) More data on this topic available from:: MC 7,171 723 (357) 10.1% (5.1%)

The Payments Minefield

Other Effective Tactics

 Continuity Billing from American Express  The Recurring Indicator  Dynamic Billing Descriptors  Strategic Authorizations (the new $0 pre-auth)  Gift Card Balance Field

More data on this topic available from::  Alternate Payment Methods

The Payments Minefield: A Strategy for Success on a Softening Economy

The Payments Minefield

When asked about the future of the credit card payments industry, one of its luminaries recently said:

“The only constant in the credit card industry is change. What we now term the card transaction industry is like the Chinese symbol for change: OPPORTUNITY and CHAOS.”

More data on this topic available from:: Successful bottom-line performance will come to those that seize the opportunity while managing the chaos.

Credits/Thank You

Paul Larsen Payments Consultant 845-489-2849 [email protected]

Credits Slide # 6 – 19Billion – Synovate’s Mail Monitor - 2007 Slide #7 – 55MM – Digital Transactions Slide #8 – 1 – Experian, as reported in US News & World Report, March 10, 2008 More data on this topic available from:: Slide #18 – Headline #1 – MSNBC.com, October 24, 2007 Slide #18 – Headline #2 – CastleCops.com, March 17, 2008 Slide #18 – Headline #3 – Digital Transactions, January 7, 2005 Slide #18 – Headline #4 – CNBC.com, January 11, 2008 Slide # 19 – Quote from Green Sheet, April 14,2008

A Look Ahead: Tools and Strategies to Maximize Conversion and Retention Rates

Sean Donahue: So our next presentation, if you’re we were talking yesterday, a little more than today, but looking at your guide book, your schedule, it says that we were talking about that tension between the ad- Flint was going to be talking this afternoon. Actually, supporting side of the business or the subscription side between his presentation yesterday morning, and then of the business. teaching some landing page optimization, that clinic, Do I take down all my barriers and go free and then Flint kind of said a lot of the things he wanted to say sell a lot of ads, or do I keep my barrier up and kind of and he asked me if I would step in and talk to you guys hang on to that nice annuity kind of revenue stream? this afternoon about sort of looking ahead. And the The fact that we’re talking about it again in 2008, and idea of what can we take back to work with from what I know it was talked about a lot after the first wave we learned in the Summit and sort of put some of these of Internet hype died down and Internet advertising ideas into action. seemed like this great thing and then there was the So this is going to be the last presentation, if you Internet bust. So, the fact that it’s so cyclical – it seems want to call it. It’s more kind of a chat about some so tied to the cyclical trends in the Internet industry of the things that I’ve been thinking about over the and the advertising industry, in particular. It just struck past couple of days that I wanted to share with you, me as this is something that you’ve got to continually and then right after that, what we do is we open up examine, continually sort of analyzing your business the floor to kind of a group Q&A, where you guys are models and seeing what’s the right balance between going to have a chance to ask questions of anyone in free and premium, or free, ad-supported, and premium. the room. I mean a lot of people are thinking, “Well, what’s the So, if there’s a topic that was covered in the last couple best business model?” Well, there is no best business of days that you want some more information, you model. It depends on your business. It depends on can ask, “Hey, has anyone got any experience with a your industry. I think John Loris of Zagat said that this recurrent billing payment question?” Or something is something they look at so often. I think monthly, like that. So that’s how we’re going to wind down the quarterly. They really sit down and start looking at afternoon. these numbers again and say, “Well, what’s the traffic like on our ad-supported side? What’s the subscription But before we do that, I wanted to go over a few growth like? Where is the inflection point where ads do things that we’ve been thinking about because I know become more sustainable, larger and more sustainable that when you come to an event like this, you spend than subscriptions?”. a couple of days listening to all these presentations, seeing all this really cool data and case studies, and we That’s the kind of analysis that I think everybody’s going all go back to our office, it’ll be there tomorrow and now to have to do. It includes sort of not just rebalancing what? What do I do with all this? the mix, but continually improving both sides of your business or making changes that will add to it. What I want to do is come up with some ideas, just a few strategies, takeaways is what we decided to call it, Hoovers talked about adding some ecommerce capabilities things you can think about, take back to your office and Zagat, again, they thought about, “Well, what if tomorrow. These are like trends or themes that I saw we create a new tier? We have, obviously, free people emerging that I hope will help you guys start planning come to the website who can read something. We have how you put some of this stuff to work in your own the registered user. They don’t have to pay, but if they subscription marketing strategies. want access to certain stuff they’ve got to give us an email address. Then you’ve got your subscription level.” I’ve got them here. I’m going to go through them one It’s sort of that rebalancing, examining what’s the right by one. I don’t want to read them off to you right now, strategy? How can we improve all these different sides but let’s start with the first one. I had to write these of our business to try and maximize the growth of both slides over lunch, so if there are typos, I apologize. It sides? was not something I had a lot of time to proofread. Another idea that I had is for that premium-content But, I was calling it sort of the idea of adapting to the portion that you’re still trying to sell a subscription to. changing subscription business model/landscape. And

A Look Ahead: Tools and Strategies to Maximize Conversion and Retention Rates

Is the idea to sell the service, the value of the service It’s not just the jobs, it’s the kind of filtering that we you provide as much as the content, especially if you’ve provide. I thought that TheLadders also just reminded got competition from a free source of the same kind me about the value of exploiting your niches. Niches of content? People can say, “Well, why would I pay a aren’t necessarily bad just because they’re small and monthly or annual subscription when I can read this nichey. They could be very valuable, profitable niches, somewhere else?” That’s where you really step in and like TheLadders has discovered. think about ways to frame your marketing message. That’s just another way to keep in mind as you’re trying As Flint was saying, “What is it, and why should I to examine what should be premium, what should be participate?” Well, the why you should participate is ad supported. Where are my opportunities? Look around think about the value of the time and the effort that for those niches that you have. I’m saving you by providing this content. If you’re The second one I wanted to talk about was Web 2.0, aggregating it in a certain way, or you’re just adding because we spent a lot of time over the past couple value to it. days talking about Web 2.0. I have some ideas about I was thinking of an example. I was talking to Inman sort of how to make it work for you, or how to find News. They’re a real estate news site, and they recently out if it’s going to work for you. That’s the other big just completely revamped their business and went from question that everybody was asking. Where’s the ROI? a premium news site to a social network, basically, Does it work? focused on the real estate industry. They realized that Unfortunately we don’t have those answers yet. We don’t there was a lot of places for people to get real estate have the single answer yet. There’s a lot of interesting news and they were having a hard time growing their trends. There are a lot of ideas people are looking at. subscriptions. So, they made all their news free and But, we can’t come down and say, “Yes, absolutely do created this social network that has a premium level. this, don’t do that.” So, to figure out if it’s going to If you want all the features you have to pay to join. work for you, or to make it work for you, because I think As a part of the premium offering, they created a new there is a huge opportunity there. newsletter that was kind of the week in review, or week’s top stories. That was something that they held back Just a reminder, I thought there was some great talk for paying customers because they had direct customer this morning in the panel about find the technology, feedback saying, “I can’t really keep up. I can’t keep or the platform, or the audience, that’s the right fit up with your daily newsletters. I wish somebody out for you. Facebook, you know, if that’s the demographic there would just tell me what do I really, really need you’re going after, that primarily younger, not even what to pay attention to?” Somebody said, “I’d pay you for are they calling the non-Gen-Xers? The millennials, and that newsletter if you made it for me.” They thought, Generation Y, and people like that, if that’s the audience “Great.” you’re going after, that’s a great place to be. The idea is in what way can you be the filter, can you If you’re someone like Paul Allen and you want to start be the trusted source, can you be the expert that would cultivating some of that audience as your customers, sift through the information that’s available to everyone but they’re not yet, you can start saying, “Well, our and say, “Here’s what you need to pay attention to.” sweet spot is over 60, but geez, if we could just get And what kind of premium can you add to that? Then some of these younger people interested, there’s an thinking about selling, marketing the service that you opportunity there.” really provide. Another idea was: Is blogging the right platform for I was thinking back to TheLadders yesterday, and really you? Well, if you work for the kind of company where kind of honing in on – it’s not just a job site where the lawyers, or your bosses, aren’t going to let you be you can look for jobs, or look for potential employees. kind of open and transparent with your blog posts, It’s really the services that we’ve focused on that maybe it’s not the right thing to do because that’s what $100,000-plus salary range, and we’ve weeded out all people expect from blogs. They don’t want just kind the distractions and all the other folks, the lousy tennis of like press releases disguised as blog posts. So, your players that you don’t want charging on the court blog’s not going to take off if you don’t have that kind that they were showing us in their ad. They’ve really of buy-in from your company to let you really be open focused in on this is the service we’re providing you. and communicate the way bloggers do, and what the

A Look Ahead: Tools and Strategies to Maximize Conversion and Retention Rates

people who read blogs have come to expect. subscription site, you’ve already got people with login names and passwords. I’ve seen many sites now starting The second point that I was thinking about to make it to expand those into letting people create full profiles. work is really think about the long-term possibilities, Zif.ca in Canada, the DVD rental service in Canada, took as well, not just where’s the immediate ROI, because people’s accounts and turned them into their profiles. that’s something that we’re still trying to figure out. ‘Tell us a little bit about yourself’. You could share your Actually there is immediate ROI. There are some – Paul movie list with other people. You can review and rank was saying – Paul Allen was saying that they sell a movies. They took a lot of stuff they were doing already lot of ads through that Facebook application, and they and just opened it up and made the communication – generate a lot of revenue from the ads in that. it’s not just one to one, customer to company. It’s now There is ROI, but it’s more about where is this customers to each other and back to the company. So, technology? Where is this type of technology going, look for ways you can build on the type of interaction and where do I think we can play a role in it? What’s the that you already have, and break down those walls long term value of our brand exposure out there? Are we between your customers so they can communicate with creating these connections with customers or potential each other and share with each other. customers participating in this dialogue? The third takeaway that I wanted to talk about is think The last point about Web 2.0 is that if you are interested about optimizing your marketing mix. I wanted to show in testing it, I wanted to say that it doesn’t have to be these charts. I’m not going to go into them because hard. It can be really simple. There are a few things Stefan went into them, but I just wanted to remind you can do that aren’t major, six-figure development you Stefan presented these yesterday. These are the projects, that aren’t going to require huge upheaval volume and quality rankings for different channels for in your marketing departments. We asked in a survey: attracting traffic. This is business publishers, and then Stefan presented some survey data about some of the here’s consumer publishers. things people are doing and where they’re seeing a I just wanted to show these to, again, think about measurable impact. Adding links to social bookmarking when you get back to your office and what are you sites like Digg, or StumbleUpon, or Del.icio.us, that’s going to do. Well, we’re going to send out, obviously, really easy to do, to sort of add those to parts of your all the slides from all the presentations, so you guys site, or after your articles. I think I’ve got the number can sit down and look at this chart and just – it might here. It was like 20% – a little over 20% of both B- spark some thinking. Maybe compare what you know to-B and consumer publishers said that they could see about your business to what your peers said about the a significant impact from doing that. Then there was channels that appear to be working well for them, and another large percentage said there was somewhat of the ones that appear to be kind of low on the volume an impact – it’s measurable, but they’re not exactly and quality scale. sure. It’s a real easy thing to do, and it was the highest ranked – on the B-to-B side, I think it was the highest You might find opportunities for things that you aren’t ranked for measurable impact. doing that are worth a test, or you might find, well, geez, we’re really – we’re doing much better in certain Another easy idea is expanding your comments policy. areas than others. It’s just something I wanted to If you have blogs on your site and people can comment remind you to think about. on the blogs, and then you have editorial articles, staff written articles if you’re a publisher, and they can’t What I was really thinking about when I was talking comment on those, there’s sort of a disconnect there. about optimizing your marketing mix was the idea that People are used to commenting on your site. Why not more than ever, I think, with the uncertainty in the let them comment everywhere? It kind of helps build up economy, which I’m going to get to a little bit more, the interaction that you’re hoping to see from a Web 2.0 but now more than ever, I think it’s really important or a social media venture, and it can be a building block to be able to measure, monitor, track all of your for further things. marketing efforts. Really sort of target the ROI, where it is, what channels are working. If you need to defend That was my last point. Speaking of building blocks, if your budgets this year, things like that, it’s crucial that you do want to do something a little more elaborate you’ve got the ability to measure and track, and make in the social media space, you do probably have some informed decisions about what marketing channels are building blocks in place that you can add to. If you’re a

A Look Ahead: Tools and Strategies to Maximize Conversion and Retention Rates working for you, what tactics are working for you. mentioned, I think it was about 20% of one group and 25% of the other group, business or consumer We got a great idea of how to do that from Jessie Lipson publishers, said they were feeling the effects now. At … with the tool that he’s got that will help you actually least 20% said they’re getting hurt by the economy. project some things. That’s one thing to do: Just really Another third of both categories, consumer publishers focus on strategic planning and measurement. and B-to-B publishers, another third of those people Another idea, a couple things that we’d been talking said they expect to feel some kind of effects from the about. Some of the presenters were talking about SEO, downturn in the next six to 12 months. and I think it ties into the whole Web 2.0 phenomenon, I was thinking, obviously, your marketing is going to is SEO is not just what’s going on on your site. It’s be a huge part of how you deal with the downturn. A about what’s going on outside your site and the links couple other strategies in addition to your marketing back to your site around the Web. Some of these social tactics, optimizing your marketing mix and focusing on networking site’s blogs are a really good area to start your most profitable channels. exploring. Are you doing enough there with your SEO efforts to get some more conversations about your Paul was just talking about some of this payment company happening on some of these sites? What ways processing stuff. I thought it would be just a really can you interact with these communities, get people great idea to plug that leaky payments bucket. That’s talking about you? Sort of start building links back to a term I actually stole from a guy I was talking to, a your site, start getting your name out there a little bit marketer, who was describing how they fixed some of more. It’s an area to look at for SEO. their payment processing issues. What he told me was they started seeing all these cancellations every month Then, obviously, paid search, which is one of the biggest … so they started digging down in the numbers. They bubbles that we saw on those charts. A lot of people are realized that a large percentage of them were from some using it and getting a lot of volume, and some success of those broken credit cards, whether expired date, or from it, but there’s still challenges. Jon Eggleton from insufficient funds. He said that he realized these people AG Interactive, I think, gave us some good things weren’t intending to cancel their subscriptions. They to think about there. If you are like him and finding probably wanted to stay on board and they were losing some keywords are getting too expensive to bid on, or them. He said it’s like finding a leaky bucket. There’s a the quality of those clicks is going down, think about hole in your bucket and you’re going to do whatever you how can you broaden your reach with long-tail terms. can to patch it. It’s the idea of instead of going after a few of the big ones, really, really widen your screen that you could be After hearing Paul describe some of those techniques, I projecting on and see where else can you get some of think it’s a good thing to sit down and think about your that traffic. own payment processing. Like he said, it’s chipping away at some of those declines. If you can recover some The second idea with that is talking to some of those of those bills, that’s revenue you were going to lose second and third tier search engines. Again, really that you’re going to get back. You can plug up that widen your net. The key point that I thought he made leaky payments bucket. was the idea of focusing on the profit that those clicks are generating, not just the clicks themselves. It’s not The other idea that we heard a little bit about over just looking well, which keywords are getting the most the past couple days is customer retention efforts, but clicks, or which search engine is delivering the most also up-selling or cross-selling. If it is going to get clicks, but it’s really tying it to your back end reporting harder to find new customers, if the economy continues and payment systems to figure out which clicks resulted to stagger along, what about the customers you already in sales, which were the most profitable. That’s really have? How can you get more out of them? I think going to help you if you do have to sort of figure out TheLadders showed us what their really focused effort which ones are worth bidding on, or worth defending on moving people up to that longer-term subscription vigorously. You’ll have a better understanding of where product, what kind of benefit that’s had for them. They to spend your time and effort and your money. just decided we’re going to get people to get into this 12-month subscription rather than the one month As I was thinking about this, I thought of the economy. because we know the lifetime value of those customers Depending on who you are, some people are feeling is so much higher for us. the effects more than others. In the survey Stefan

A Look Ahead: Tools and Strategies to Maximize Conversion and Retention Rates

One idea that really stood out to me was kind of this probably in the summer and fall. We wanted to remarketing to people who had been customers, and give you a heads-up. You might want to set aside some the way they were able to incorporate that one-click money for some of these new tools that we’re going to reactivation. They had their credit card information add.” Then they went back with their sales team later on file, and they were able to say, “Hey, start up your when it was ready and they said, “Here’s a free trial. On account again. Just click here.” Not having to get the back end, we’re going to give you guys discounts, people to type in that credit card info, that just struck depending on the volume of access that you want.” You me as a great idea of something to test. If you can pull could get some of the titles, all the titles, that kind of it off on your own, if you’ve got the systems in place, thing. that seems just like a great little thing that could really The result of this was that they signed up 2,000 of these bring a big lift. institutions as free trial customers, and they didn’t give Also, in the retention or cross-selling, I was thinking me the exact conversion rate, but he did say that they about what Jessie said when he used his model to look got enough people to convert over to paying customers at what would happen if he reduced the churn rate from that their revenues for the year, in the books division 4% to 3%. The model projected out a lifetime value grew 15%. Typically their revenues grow 3 to 4%. So increase of $10 million, I believe. It’s really something they blew their revenue growth totally out of the water, that the accrual rate over time, what you can do now, is thanks to a big focus on taking some of these old book really going to pay dividends in the future. titles and putting them online and really marketing it in a strategic way. Then I did want to add something, because I was thinking about this myself, was repurposing content. My last takeaway has to do with testing. We’ve We all are probably sitting on lots and lots of content. been talking about testing a lot, and if you read What else can we be doing with it? Where else can we MarketingSherpa, or you come to our events, we always be sending it? What other channels could we be using? say test, test, test. Test everything. It’s true, you can, Partnerships, new products, it’s a good time to think and probably should, test everything. I wonder if there’s about those opportunities if your revenues are slowing going to be a lot of head to head matchups between or your subscriptions are starting to stagnate a little bit orange, and blue, and red, and gray buttons after what because of the economy. we’ve heard. I throw in a mini case study from an interview I did I want to talk a little bit about something that I noticed recently. This is Elsevier. They’re the big science and about the tests. First, a reminder, again, from Stefan’s technology, the big research and academic book talk. We asked people what tests are they conducting, publisher. This is specifically their science and and where are they seeing some of the best ROI. This is technology books division. They had created an online B-to-B publishers, some of the top ones were refining platform several years ago called Science Direct. It was their site architecture, SEO, email list cleansing. Really for institutions like libraries, or research organizations, high ROI. Then on the consumer side, multivariate hospitals. Large group users could access some of these testing of site pages, email cleansing again. This is textbooks and other reference books online through the something I thought – just wanted to remind you. Like Science Direct platform. the bubble chart, to take back and sit down, if you’re thinking, “What other kind of tests should I be doing?” Last year they thought, “Well, this is good. We’ve got Here’s what your peers said about where they saw some about 2,000 books on it. What else - we’ve got to be good ROI. doing more with Science Direct.” They made a big push and they digitized 4,000 books in their catalog. These What I noticed was that of all the millions of tests you are titles that they were selling, but they thought, “We can do, and fun things that you can test, it seemed like don’t have them available online yet.” They basically a lot of this stands to reason. It’s an obvious point, – they digitized double the amount of books that but I think it bears repeating in case you get kind of were already available. So, they expanded this product overwhelmed with these questions: Where do I start? hugely, then they went out and they went through a How much testing should I do? What should I test first? very specific marketing campaign. They went to their It looked like everybody – a lot of the case studies we institutional customers early in the year when they saw – they’d identified one very specific piece of their were budgeting, and they said, “Hey, we’re launching subscription sale process, or one very specific problem

A Look Ahead: Tools and Strategies to Maximize Conversion and Retention Rates they were having that if they could fix that, they would frame around your thinking over the next few days as get significant increases. you’re trying to figure out what to do next. They weren’t testing little things around the margins. What I also wanted to do is, like I said, open up the They were trying to figure out what’s the main driver of floor to a Q&A and let you guys ask each other questions subscription conversions on our site? What’s the biggest you might have, or if somebody else has something pain point we have? How can we design a test to try and that they wanted to share, their key takeaways, or their improve that? Think about, in your own subscription big idea that they think would help other folks in the marketing practices and processes, what’s the one area room, that’s what we’re going to do now. If anyone has where, if you can design a test, or focus on one part questions for me, I’d be happy to answer questions, too. of the process to deliver the biggest potential bang for Let’s open it up, ask questions to your peers and to the your testing buck, what’s going to help you really sell other attendees. more subscriptions? Participant: Hi, thank you. I have a question around In the case of TheLadders, it might be identifying video. We’re doing more with video. We’re actually the lifetime value. So, they did all those tests around looking to do more with live video, and maybe kind of a migrating those people into the annual subscription. live feed, if you will. I was just curious if anybody here Britannica was showing us tons and tons of test today is doing that. I’d love to catch you on a break. they’ve been able to do, but the first thing they had Participant: Coming from like news, or something that to focus on is our free trial conversion path right? Is it you’re programming? optimized? Are we getting enough people into that free trial funnel? Obviously, getting people into the trial is Participant: Yeah, think of it as kind of a live, web- a hugely important part of their marketing process, so based TV show with chat. they wanted to make sure – before they started testing lots of other things, are we getting enough people Sean Donahue: Anyone doing any video stuff they into that free trial? That was where they focused their want to talk about what they’re seeing? efforts. Participant: We broadcast live Big Brother, 24/7, with It might be a particular feature, or a service that you’re chat. You can get it if you want to sign up for a free providing that you think is going to help get those trial with SuperPass. people to actually click and buy, get them over the Sean Donahue: How does that – can you explain a hump. That was – Kate O’Neil at Magazines.com, they little bit how that works? sat down and thought, “Well, are people just – do they need a little convincing? They need to feel comfortable Participant: Well, it’s – we have cameras in the Big this is the magazine they want. Let’s do the look inside Brother house, and they transmit the video, and we and see what happens.” They tested it, and it turns out receive it, and we make it available to our subscribers. it didn’t work, which is great, because they got some They’re able to chat while watching the video. It’s pretty valuable information out of it. straightforward. Just to wrap up on testing, I wanted to reiterate what Sean Donahue: So, it sounds like if you’ve got questions Kate said in her presentation: Whatever you decide about specifically how to implement a technology like to focus on, whatever is going to have the biggest that. Maybe you guys could have a chat. potential payoff, formulate a pretty good hypothesis Participant: Does anybody have any experience using and test it. Don’t just start randomly throwing things in affiliate marketing for pay-per-click search, and maybe there and seeing what happens. Think about what you the dangers in doing that, or risks? know about your customers’ buying behavior, or what you know about the marketing that you’ve done in the Participant: Oh, yeah. Basically affiliates, I think, past and take some educated guesses about what are can play a good strategic role, but they’ve got to be some of the significant elements you can test? What’s managed in a way that fill in the gaps. They don’t think the hypothesis you’ve got? Then design a test that’s that you exist to maximize their business but, in fact, really going to answer that question for you. they exist to help maximize your business and they make money at the same time. Does that help? Those were five of the main points I had. I was hoping that they would help you guys just kind of put a little Sean Donahue: Anyone else got thoughts on affiliates

A Look Ahead: Tools and Strategies to Maximize Conversion and Retention Rates

and pay-per-click? a cookie. I guess if they – they could probably delete cookies and have as many free trials, even if they’re Participant: On that same topic of affiliates, probably using the credit card. one of the most strategic things to bear in mind is when you find one that’s hot, don’t become over-dependent on Participant: Yeah, I just think already, even with them. Stay diversified, or before you know it either they regular trials where a payment method is required to can have you in their back pocket, or more importantly, open that trial there’s already so much gaming that can something can happen to their business model which go on, and so much that – bad people come to you to will suddenly cause your money bag to dry up. Stay try to do something with you, for reasons that may have diversified, like a stock portfolio. nothing to do with your service. They may just be doing something called card cleaning, just to see if a stolen Participant: One thought is sometimes you might card is still active or whatever else. If you’re opening thing a really good affiliate’s doing really good things up free accounts without anything, what additional for you. In fact, really not doing really good things for gaming are you opening yourselves to? Would you be you, that you’re being gamed by that affiliate. You have OK with that? to keep on top of that. A drastic way to monitor that is to match your chargebacks all the way back to what The second thing is, I’d say you’ve got to make people affiliate brought that sign-up. It gets even more brutal earn it. I just think the economics of somebody signing than that. It actually is probably a fraudulent subscriber up for a free trial, and then you have to go back and get that came in. You don’t just match an affiliate to an them – you have to convince them to give you a card action, or a signup, or a new subscriber. after the trial, it just sounds like a lot of work. Make sure that that subscriber really is a good customer Marybeth Gavin: Yeah, I’m with Hoovers. We do free as opposed to – they bail out a month later, or after the trials all the time. It’s one of our primary lead gen free trial, or something because it really wasn’t actually efforts. One of our highest close rates, but the trials are a customer. It was a stolen credit card, and that affiliate not filled automatically. They have – since it’s a fairly just wanted to get some money from you. Does that expensive product, it’s over $1,000, they have to talk to make sense? It’s a really tricky one. That’s why, to the somebody to get the trial fulfilled. other gentleman’s point, you’ve got to monitor your The other issue is that all of the leads go into our CRM, affiliates. so when we get a request for a free trial, the sales rep Participant: All right. My manager thinks it’s a good goes into the CRM, looks and see if it’s been fulfilled idea to do the two-week or 30-day no credit card trial. previously, and then can have a different discussion People are laughing. I would like to go back to him and with that person. say, “Listen, 100% of the people in the audience, and Sean Donahue: Yeah, is that – I’m curious. Do you MarketingSherpa said you’re crazy.” Is it dead? Is it in have more of a sort of higher end product? More of a the wastebasket? Is it just insane to try that? Or are complex sale, like Hoovers, or is it more like a consumer there certain – we have a real niche, and I think – is it style subscription where – I think that would be, like worth testing? Marybeth was saying, a significant difference in whether Sean Donahue: What do you guys think? Is the no a free, no credit card required trial was going to be credit card free trial worth testing at all? I know a lot of something worth testing. people said – or a couple people actually said they had Participant: Right. Actually it’s a similar price point tried it and it didn’t work. I think even Britannica said and can be actually more expensive. It’s economic they might go back and test it again. What about you research, so we have a lot of corporate accounts, and I guys? What do you think? I see a hand up there. think that your advice is pretty good. Maybe we should Participant: I guess the first question I’d have is what’s experiment with pushing people to the phone and this to prevent somebody from opening many, many free product always ends up creating longer-term customers trials without a credit card or without some payment who buy data and more in-depth analysis. Maybe, in method, or opening an account? That would be the first fact, the credit card thing isn’t the most efficient over concern. the long term. Thanks a lot. Participant: I’m sorry. Right now it’s not the credit card Participant: In regards to that same question, we have number that we use to block consecutive free trials. It’s a free trial as well, and we’re not allowed to ask for a

A Look Ahead: Tools and Strategies to Maximize Conversion and Retention Rates credit card with the merchants that we’re working with. have you ever tried not using a free trial? Just curious if anyone has found anything – we’re not worried about them scamming us or using our product too much. If anything, we have the opposite problem, Participant: Well, we use a money-back guarantee. not using it enough. We’re not real worried about that. We don’t use the free trials. That’s worked fine for us. Has anyone found any key levers, such as the length of We’re a newspaper, The Chronicle of Higher Education. the free trial, or limiting the content more, or anything We give them, not a 30- day, but for the whole year, if that’s helped them convert free trial users? they sign up for a year, and after 11 months they want to cancel, we’ll give them all their money back. Sean Donahue: All right, who’s got thoughts on - tips on converting free trial users? Participant: The whole thing? Participant: Couple of suggestions. First is, be prepared Participant: Yeah, and not many people take us up to need to engage them with a series of emails. Don’t on it. We have a good product. We’ve been very happy think of them in terms of a welcome series. Think of with that. them as you literally have to drag them back kicking and screaming. You can’t assume that they’ll, if you’ve Sean Donahue: Do you think the ability to do it without made it an impulse buy, the odds are they’re going to a free trial, do you think it’s because of the brand buy it but not try it. You have to keep sending them a recognition within your market. The Chronicle of Higher series of emails. Education, you’re obviously going after educators. Do you think that they’re comfortable with you enough Second is, time those emails based on how rapidly that they’re willing to jump in without the free trial? they’re likely to cancel. Some folks, in some businesses, they really are using it just really for one shot, in which Participant: Yeah, we have a very good reputation. case they’re going to cancel within a matter of days, so We’re number one in that segment. Everybody knows you better get something rapid out to them. about us. Third is, consider using a premium, some sort of a Participant: I was just going to say our product has downloadable to get them to come back. changed slightly in the last six months. I work for ft.com. We used to run a 15-day free trial with credit Participant: Do you mean the downloadable at the end, card required. We now no longer offer a free trial. There’s after they’re starting to cancel, or in the beginning? more content that you can sample freely. I would say that we’ve had quite a dramatic drop in initial signups, Participant: This downloadable would be a reason to and that the rate of attrition that we’d see from the bring them back. In other words, “Come on back. We’ve 15-day free trial – the attrition from the no free trial got a special report for you. Come back to the site and subscription is not discernibly different. Nothing beats get blah, blah, blah.” Anything you can do that will get the power of free in my opinion. them in the habit of coming back, because they’ll be more likely to see some other piece of content on that Participant: Hi. I almost feel ashamed to admit this special home page that you’ve created for them that has based on some of the conversations I’ve had in the last their downloadable. couple of days, but my company does not force an auto- renew for our membership. We offer the option, but we Participant: The question is do you really need to don’t force it. My question is has anyone else out there have a free trial at all as opposed to a money-back transitioned from non-auto-renew to forcing it? What guarantee? Right now we don’t have a free trial. We lessons did you learn from that experience? have a 30-day money back guarantee, and I’d like to get – I got a sense from a show of hands earlier that many Sean Donahue: That’s a good question. Who could people have a free trial. Have you guys tried a money- share some of their experiences in moving people over back guarantee? We charge you up front, and you don’t to the auto-renewal? like it, you get your money back, no questions asked, as opposed to a free trial, and you get a lifetime free Participant: Here’s my perspective on this. If you’re trial. asking someone to pull out their credit card, and your ultimate goal is to get them to pay you month, Sean Donahue: What do you guys think? Anyone feel after month, after month basically on the same date, like attacking that? Someone who is running a free trial, membership or subscription program, there’s not really

A Look Ahead: Tools and Strategies to Maximize Conversion and Retention Rates

any reason not to auto-renew them. In fact, I can’t I would suspect that you’re going to get more if you really imagine why you wouldn’t do it. automatically renew them. You’re going to get that, say, 23% or whatever it is, whereas if you ask them – I mean Think about it. The most difficult thing is to get them you can also ask them afterwards. You can say, “I notice to take out the credit card from their pocket and that the credit card payment didn’t go through. I want enter those numbers into the payment processor. Once to give you this occasion to save your membership, they’ve already done that, checking or unchecking that or to lock in whatever the rate was.” You’re definitely box, I wouldn’t even give that as an option because going to lose more revenue by not doing it than you are they’ve already made the most important decision that by doing it. That’s almost definitive. they need to make in their buying process, which is pulling out their credit card and entering it in there. Unless there’s a very strong reason, for example, you Any other decision is secondary, and if you’re not think that they might complain, or accuse you of fraud stacking the deck in your favor right there, when you’ve or something like that, on a very regular basis, then in got your opportunity, you’re probably going to lose that my mind there’s no reason not to do it, or at least test opportunity. For a lot of those customers, you’re never it as soon as possible. going to get it back. Participant: I’d like to answer his question too. We Participant: Actually, I should clarify. We have two helped a very large software company go from yearly membership products. One of them is a month to upgrades where the customer had to purchase something month, and you have to do auto-renew. It’s the year and to an auto-renewal process right up front. I guess the two year that we don’t do an auto-renew. I guess the corollary is it’s a significant up-side when you ask original reason was that it was a long time, and there someone to do an-auto renewal. When the reputation of was churn. Our members tend to be like freelancers and the company is at stake, one should worry about that. they don’t have steady income, so we didn’t want to In this particular case, the merchant really worries force it on them. I’m thinking we should at least test it. about communicating very clearly and consistently Just wondering if anyone else has tried that. with the customers, so two weeks – there’s a countdown Participant: Hi, I work for a magazine, and about three process before the auto-renewal happens. They will years ago we brought in continuous credit card, which is, send an email to the customer that, “Hey, the yearly I guess, what you call auto-renew. We found that it was auto-renewal is about to come up. Please look for it. a great way of bringing in acquisition for subscriptions. Here’s a way out.” Not to make it easy, but here’s how We have something in the UK called direct debit, which – if you decide this is no longer for you, here are the works in the same way from your bank account, which instructions, and they’re very straightforward. has a very, very high retention rate of about 80%. We Also they have a great customer service process that thought that the auto-renew would have the same kind if there is a charge and the customer says, “Wow, I of retention rate here in the states. What we found is forgot about this,” they’re very prompt about the refund that we have a slight drop off after the first payment, policy and that sort of stuff. To this gentleman’s point, but we have a really high drop off after one year. We’re the uptick in revenue by auto-renewal versus asking only renewing about 23%, which compared to our UK someone to re-up again, because people put off those direct debit rate, is incredibly low. So I would say it’s a decisions, or you might lose them to your competitor if good thing to test if you’re looking for acquisition. you have a competitor, it’s significant to the point of I guess the other part of my – what I’m saying is does 50, 60, 70% difference in retention rates. anybody have any ideas on, or experience on, how to Participant: I was just going to say to the lady who improve the churn rate at the other end? just asked the question about the auto-renew, talk to Participant: I’m sorry, I just had something more that Paul Larsen, because not all payments processes are I wanted to add after what you just said, which is – you created equal. The more we’re getting into our own know, you said they might not have a stable revenue, or payment processing situation, the clearer it is to me they – I mean there’s not much reason to think about that we need to make some pretty good changes. that in your position. Of course, you want to be an We have the same situation. We have our best – we’re ethical and upstanding, moral person, but frankly, if a shipyard – our best customers are canceling at great you can get 23%, that’s a heck of a lot better than rates after two years. That can only be because of credit zero. As long as it’s clear in your agreement – I mean

A Look Ahead: Tools and Strategies to Maximize Conversion and Retention Rates card issues. When we’ve got down to user cancels you Participant: We haven’t done it yet, but to kind of get the opposite trend line. We get people – a lot of follow up with what Marv was saying regarding the people cancel up front, and then sort of fall away. On auto-renew, we’re attempting to rebuild the annuals for the system cancels, you’re getting the opposite trend. an auto-renew. I think it’s somewhere around two weeks Definitely talk to somebody like Paul. or a month beforehand. If that’s coming up as a fail, as a hard fail or even a soft fail, what I’m in the process Participant: Just to follow up on the gentleman who of implementing is having our customer service follow did that. We went through – one bailout might be up with these individuals. We do send them emails, but because we had the same debate internally in ours, and to also follow up by phone because it could be a – like ours is – our annual is a higher priced deal. It’s $1,000, what Paul mentioned and like Marv mentioned in terms so we actually went in and did an annual auto-renewal of – it’s something we just don’t want to see. When you to a monthly and put it in there so that they wouldn’t see an annual renewal come up and fail just because get hit with a $1,000 automatic renewal. of a credit card failure, it’s unacceptable as far as I’m Then plus, that’s a higher price point, so we tied it into concerned. We want to put as much resources as possible our CRM with our sales guys. The sales person who sold to try to prevent that. I think a simple way to do that that got an email, internal email, three weeks or four is really getting the customer service team following up weeks prior to that. He got two weeks to try to upsell with those individuals in as many ways as possible. I them. Then the rest of the sales team got the email if think phone is quite a simple way to do that. he wasn’t able to upsell them in the annual. Again, we Participant: Sorry, this is just a topic that I’m really wanted to make it a personal call. We did do the auto- passionate about, so I’m sorry I keep chiming in. The email also saying, “Hey, your subscription is coming other thing to – one comment actually about – that I up.” want to make about several of these questions is I think But from the auto-renewal standpoint, because we it’s important to watch usage patterns by customer. So, were afraid, boom, they’d get hit with a big charge, for instance, if you have a renewal, a person where a that’s going to generate a call. So in our contract we renewal is coming up, there’s going to be a – if you can did annuals automatically renewed to a monthly. Again, segment your audience or your customer base where haven’t gotten any feedback – negative feedback – on there’s some yearlies, where wow, they haven’t used, that. they haven’t logged into their subscription, or used their subscription, if it’s measurable, in nine months, or Participant: I just want to add one quick comment in six months, or something, you might have to worry. also about what Paul had mentioned in his presentation. Especially if you’re going to do auto-renewal where In fact, even for a trial I would recommend making sure it’s a long period of time, you have to really take into you can monitor people’s usage patterns, because if consideration that you will have some card breakage, they started a trial and they logged in like a day after where the card isn’t alive still, and that you have good they signed in for their trial, and then they never logged processes in place to make sure –like implementing in or did something again, those are people I think you Account Updater to make sure that you can get – recover need to market to more effectively or ping them with a some – a lot of those dead cards that – because that different email that says, “Hey, we noticed you haven’t will be a problem for some – that will be a hurdle you’ll logged in in a while, or you haven’t downloaded or have to make sure you solve. streamed a movie, or watched something. Is something not working for you? Go check out our FAQs, or we’ll be Sean Donahue: What about the question where we glad to help you.” were talking about the churn that you’re seeing as the long-term subscribers are dropping off. One woman said That’s an opportunity to treat them differently. If you it might be actually a payment processing issue and not see somebody who logs in every week, and it’s month that they intended to cancel. 10 or month 11, and they’re still really excited, then you know something there too. Has anyone done anything kind of to attack the marketing challenge if you are trying to renew somebody on an Participant: Addressing the question about how to annual or two year? Is there anything that anyone’s improve, how to reduce that churn. In the early years done to help reduce the churn that they might have of my business I did a lot of work with companies to seen from people just saying after two years, “I don’t help do that, and there were a couple of rules of thumb want to do this.” Anybody got any tips on that? I found. The first is to identify what portion of these

A Look Ahead: Tools and Strategies to Maximize Conversion and Retention Rates

cancels are coming from bad credit cards that aren’t well, too. I think it helps you put people into buckets processing versus people who are requesting to cancel. as to how you want to deal with them in a profitable On the credit card processing side, what the woman way, and minimizing the churn you’re all talking about. up there mentioned about working with a consultant You definitely do not want that gold customer to churn, makes an enormous amount of sense. I typically found whereas the loss of a bronze level customer isn’t probably that about two-thirds of the cancels that customers going to impact your business nearly as much. were getting were credit card related as opposed to Participant: I just had this brainstorm. I wanted to really prevention related. It’s hard to go out and get see what you guys thought. If I scrapped my two- week that person once the card has failed. The economics are trial and instead was able to throw up a – essentially not very positive, whereas preventing it by using some a five-minute trial. The user comes to the home page, of those operational practices is very cost effective. within 15 seconds I show them an Ajax pop-up div and Then for the third who are calling to request cancel at say, “Listen, you’ve got five minutes to check it out, the end of that year, it goes back to the comment I and then we’d like you to subscribe.” They can do their had made about getting the person engaged early on own mini-tour. They can go wherever they want on the and continuing that engagement as much as possible, site, and it would eliminate me from having to update and consistently, so that at the end of the year they’ll a tour constantly. actually be users. Essentially, they can do whatever they want for five Lastly, having a good call center where the customer minutes, and they have a good idea of what the product is required to call to cancel, and you’ve made the is. Does that seem like a reasonable thing to do? Is phone number very readily accessible on the credit card there any merit to using technology like that to engage descriptor line so that you’re not trying to keep it from people? being easy to cancel, but having good reps who are Participant: I think that’s going to go back to what good at convincing the person, making the person want Flint was saying earlier today. Five minutes is going to to stay, whether it’s by giving, extending a period – we’ll induce massive anxiety. People are going to want to give you three months off for you to continue onward, leave. whether it’s giving them the right kind of information, providing a premium, etc. Participant: Yeah, I was just going to add I think it was at last year’s Summit that – and I forget which If yours is a very low-priced product, it can be actually speaker it was. He was actually saying forget three-day more cost effective to do that on the Web itself by trials, forget seven-day – make them 30-, 60-day trials, making those offers in an automated way, just because because people forget about that, and they just – to the calls can be expensive. keep rolling. As long as you’ve got the credit card, let Participant: Yeah, one thing that might be helpful it roll. A three-day trial, two-day trial, five- minute trial for everyone too, is I’ve worked with several different makes you very aware when time’s up. companies that have had various product levels and Sean Donahue: It also gives you – I think Bill was various price points. I think one of the ways you might saying the longer a trial gives you more opportunity to want to look at this is classifying your customers to market and reach out to that person and engage them. the point where – one organization I worked with, we You’ve got multiple chances to email them with tips on classified customers based on their spend, and what how to use the site, or links, like, “Have you checked products they were buying, gold, silver, bronze. out this section yet?” Whatever you can do during that A bronze customer would get occasional email trial to engage them. If you’ve got a little more time, touchpoints. A silver customer would get two account you can do more of those techniques. management phone calls a year and some email Participant: Well, let me just say this. There’s always touchpoints. A gold customer would get absolutely a the problem of if you lock down your site then Google quarterly account management telephone call, as well can’t get in to index everything. I don’t know if Google as the consistent email touchpoints. You look at the works within five minutes, but there would be that profitability of that customer versus how much you – maybe that would be a solution so that qualified want to invest in continually communicating with content gets into that, and people who show up at a them. Obviously, an account management phone call landing page that’s deep in my site, you can see that is more costly than an email. That tends to work really

A Look Ahead: Tools and Strategies to Maximize Conversion and Retention Rates ping instead of having to log in and create. They have of cancellation, I think one thing we should all be immediate experience with involvement. cognizant of is some of these things seem to me to almost be kind of gaming our clients in the respect that Participant: I would sort of agree with what you were people are talking about make it long enough that they just saying there. If Google’s not getting to your deep forget about it. The various people have talked about pages, it’s not because you’re not showing enough let’s make it difficult for them to cancel. content. It’s because there’s some other problem with either your site index or how they’re linked. You might I’m not a big fan of those tactics because – and granted, be in their supplemental index. It’s maybe a deeper maybe it’s because I’ve tended to work with organizations SEO problem rather than the amount of content you’re where the subscription costs, or the product costs, were showing. higher. I think the transparency with which we deal with people, and kind of the ethical level, and the ease I think there is a linear relationship between the amount with which we allow them to cancel has to really kind of content you show and sort of how high you’ll rank. of be directly proportional to the subscription cost. If You should be able to show up for even small snippets I’m taking a thousand-plus dollars from a client, I don’t of articles of 600 characters, or even less than that. really want to make it that hard for them to cancel if Then on the free-trial thing, I think you and I mentioned they’re unsatisfied with the product. In fact, I want to this, but we tested a seven-day trial versus a one-day encourage communication and say, “Hey, how can we trial just last month, and fewer people signed up for the fix it?” one day trial. People definitely see some sort of value in I just wanted – maybe that’s the devil’s advocate that sort of, “I’ll get seven full days. This will be value position, but I think we were talking about it from there.” Then even worse than that, not only did fewer the other perspective and I just wanted to throw that people sign up for the one-day trial, fewer people made in because I think it’s kind of important to make the it through from the trial to the actual sign-up process transaction and the cancellation process transparent there, so it was a big time loser. and kind of honest, and allow them to communicate Participant: I just wanted to say that I did some with you pretty easily. telemarketing last year for our online product, which Tad Clarke: I have a question. Just – this is to help is a high-cost subscription. They advised me that the editorial, Sean and me, as we come up, talk to people longer the trial the better because people don’t always and get stories and everything else. The content that start looking straight away. They want to come back at you got from the conference, the content that you different times. They might want to show it to other see in Content Biz every week, and if you subscribe people, depending on how much money your product is. to any other newsletters, do those address what you’re I think a really short trial just serves to annoy people. looking for? Are there pain points that you don’t – that The other thing is if you only give them a really short you experience in your day-to-day life that you need period of time, you might not have a chance to capture addressed, and you need answers to, and you’re coming their data. If data is important to you, and you want to MarketingSherpa and we don’t have it? Anything them to sign up, then do that first and then let them that you fear that’s on the horizon that’s becoming a look around and get a feel for your site. problem? Are you going, “God, I don’t even want to deal with that today.” Anybody got anything there for Participant: A 30-day – if you go through 30 or 60 advice for us? days for a yearly subscription, on top of probably – your yearly discount on top of the monthly even, that’s a Participant: I’d love to be able to see vendor reviews. pretty aggressive from a pricing perspective, it’s not We’re looking for an email service. Here are the top 10 neutral. If we can find out ways to engage, I like this email services. We’re looking for a survey tool, we’re idea of really engaging people during that touchpoint looking for this, that, the other. Being able to get, as opposed to delaying further future touchpoints that I suppose, input from other people, user-generated may or may not happen. I guess those longer trials, reviews, and that kind of thing. Any kind of feedback those people doing them probably capture email up that you all would provide, or a buyer’s- guide type deal. front and then engage through email cycles? A quarterly buyer’s guide would be very helpful. Participant: Yeah, hi. There’s been a few discussion Participant: It sounds just from the topics that were cycles, but talking about the trial length and the ease bounced around a little while ago it’s probably time

A Look Ahead: Tools and Strategies to Maximize Conversion and Retention Rates

for us to do another round of review on free trial offers down. I just wanted to see if you guys have expanded and automatic renewals. There’s been some new activity that, and do some case studies on some off line stuff. in the last year or so by the FTC relating to it, none Sean Donahue: So does anyone in the audience have of which is any huge issue, but it’s always: What the an unanswered question, or a topic that they wanted to gentleman who was up there earlier mentioned about talk before we wrap up? I don’t want to shut this down the need to disclose properly, and to have the proper if there’s somebody out there who’s still got a question customer friendly policies and so on, as well as a number they want – if they want to use the knowledge in this of questions here. room to their advantage. Some of these are questions that came up in these All right. Well great, then. I guess we’re going to finish sessions five years ago, even six years ago. It seems up. I want to thank all of you for coming and staying like there’s always a bucket there to be filled with until the end. I want to thank our sponsor, this year it information about automatic renewals. was Vindicia. I want to thank all of our speakers again. Participant: I mentioned seeing more content on I know a few of them are still here. We really appreciate what people are doing with video. This has become so that they were able to donate their time and give us ubiquitous in the last year. Even myself, just habits, I some of their topics. We look forward to seeing all of watch more TV on my computer screen than I ever do at you next year. home. I’m curious to know – conversion rates, free trial to paid, I get 15%. I don’t know if that’s where that is. I missed Stefan’s data early on. Why can’t it be higher? Could video be used other ways? They talk about you’re actually selling to people, you’re not selling – it’s a person-to-person thing. I’d like to see more on creative uses of video and other things along those lines. Sean Donahue: Live video as - Participant: The live video thing. That’s interesting too. Tad Clarke: Or even video just in ads? Or is it really just of the content? Participant: Well no. I mean, I think there is rising interest among advertisers in video ads as well, so certainly that’s a topic. Then we would like to pursue more development of podcasts with our editorial team, but I know – it doesn’t seem like there’s too much happening in the advertising world related to that. Anyway – and I don’t know how that could be used in the conversion or marketing process, but those are just some ideas. Tad Clarke: Yeah, great. Thanks. Participant: Specifically for the subscription side, I’d like to see focus – I mean it’s really heavy online subscription for this conference. I don’t know if you’d expand to the offline stuff also, and get some of the big players in here who do subscription models that are out there that are mainly on the TV, radio, billboard, all the other stuff, other medias that we might be able to get into because I know a lot of those costs are going

A Look Ahead: Tools and Strategies to Maximize Conversion and Retention Rates

A Look Ahead: Tools and Strategies to Maximize Conversion and Retention Rates Sean Donahue, Senior Reporter MarketingSherpa Inc. Tuesday, May 13, 2008

More data on this topic available from::

Where do we go from here?

 5 takeaways from the Summit

1. Adapt to changing subscription models 2. Make Web 2.0 work for you 3. Optimize your marketing mix 4. Defend againt the economic downturn 5. Target tests for maximum potential value

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A Look Ahead: Tools and Strategies to Maximize Conversion and Retention Rates

Takeaway #1. Adapt to changing subscription business models

 Continually rebalance mix of paid and free

 Sell service as well as content

 Exploit your niches

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Takeaway #2. Make Web 2.0 work for you

 Find a tech or platform that’s a good fit

 View it as a long-term strategy

 It doesn’t have to be hard . Add links to social bookmarking sites . Expand comments policy More data on this topic available from:: . Build out community from existing platform

A Look Ahead: Tools and Strategies to Maximize Conversion and Retention Rates

Takeaway #3. Optimize your marketing mix Business Publishers

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Takeaway #3. Optimize your marketing mix Consumer Publishers

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A Look Ahead: Tools and Strategies to Maximize Conversion and Retention Rates

Takeaway #3. Optimize your marketing mix

 Modeling/projection to plan marketing for maximum impact  SEO – explore external links to social networking, blogs  Paid search . If CPC rising in broad terms, explore long- tail terms . Second and third-tier engines

More data on this topic . Focus on profits, not on clicks available from::  Test messaging to increase customer response

Takeaway #4. Defend against the economic downturn  Plug your leaky payments bucket  Focus on customer retention and cross-sell/upsell opportunities  Repurpose content for additional revenues

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A Look Ahead: Tools and Strategies to Maximize Conversion and Retention Rates

Content repurposing mini case study

 Elsevier Science & Technology Books Division . Digitized 4,000 existing titles for subscription-based ScienceDirect.com platform . Marketing through free trial and volume discount offer . Signed up 2,000 customers for a free trial More data on this topic . available from:: Boosted S&T Books revenue 15% -- vs. typical growth rate of 3%-4%

Takeaway #5. Target tests for maximum potential value

Testing ROI – B-to-B

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A Look Ahead: Tools and Strategies to Maximize Conversion and Retention Rates

Takeaway #5. Target tests for maximum potential value

Testing ROI -- Consumer

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Takeaway #5. Target tests for maximum potential value

 Identify your major pain point or biggest subscription driver . Upselling to higher sub package . Trial registration path . Feature/service that gets visitors over the hump  Form a hypothesis and test it

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