The Debt Ceiling and Politics

I’m certainly not a political or economic expert, but the debt ceiling debate in Washington seems to be much more about politics than it is about the viability of the economy. A few facts to consider:

•  Congress put the debt ceiling into place in 1917
• The purpose was to cap the President’s ability to borrow and spend money so it wouldn’t get out of control
• This was necessary back then because at the time Congress had little control over our budget
• That has changed
• Since the 70’s Congress has direct control over the budget each year (taxes and spending)
• The ceiling, which is now at $14.3 trillion, has been raised nearly 100 times since 1917

From what I've read, most agree that raising the ceiling would have little material effect on the economy, good or bad.  Though it would be an important, high profile, symbolic event reminding all of us that the U.S. needs to quickly get its spending in check.  I think we’re all for that.

But most also agree that not raising the ceiling could be catastrophic for the economy (though there's no precedent for it as it's never happened).  We’d default on our debt payments, raising interest rates and damaging the credit rating of the United States.  The economy would almost certainly fall back into recession.

So why all the support for not raising the ceiling?  Why not just raise it one more time?  What’s the big deal?

The answer is simply politics.  This symbolic event is a fantastic opportunity to make the President look economically incompetent.  Putting up a big fight puts a huge amount of attention on the fact that our national debt is out of control and makes the President look bad as he ramps up his re-election efforts.

While I recognize the need for political posturing, not raising the ceiling makes no sense given the fragility of this economy.  It would be a classic case of the punishment not fitting the crime (only we’d be punishing ourselves).

As James Surowiecki writes in this week’s New Yorker, it’d be akin to "shooting yourself in the head for failing to follow your diet."  Let's hope Congress puts politics aside and sees it that way too.

Personalization Doesn't Work...Yet

Most of us know that a huge trend in e-commerce is the personalization of websites and email content.  You'll log-in into a site and you'll only see the things that you want.  You'll receive emails that are personalized to your interests, you'll only see the things that matter to you.

While this sounds wonderful, it simply doesn't work well right now.  By "well" I mean it isn't profitable.

Here's a perfect example.  iTunes knows literally EVERYTHING about my taste in music.  They know my favorite songs and artists and my least favorite songs and artists.  They know the artists and albums and videos I've purchased.  And those that I've viewed, but chosen not to buy.  They know enough to have give me the most personalized music shopping experience on earth.  

But what do I see when I log-in to iTunes?  Huge display ads for albums from Lady Gaga, Katy Perry and Pitbull -- three artists I've never dreamed of buying.

Same thing with Amazon.  They know everything about my online shopping habits but all I can see on the homepage is a huge display ad for the new Kindle.

The reason for this is simply that personalization doesn't work in the short term.  And marketing managers that decide what goes on the homepage need to hit their numbers this week and this month and this quarter.

I can almost imagine the conversation at Apple:

CEO: Hey, we know so much about our users, why don't we show them albums that are relevant to them on the homepage?  Won't they convert better?

iTunes Marketing Manager: Well yes, they'll convert better but the incremental revenue from the better conversion doesn't even come close to the incremental revenue we get in fixed marketing fees for putting Lady Gaga on the homepage.  In addition, Lady Gaga's label pays us a larger revenue share per album.  Also, if we sell 50,000 Lady Gaga albums this week, we get a $1 million bounty from her label.  So while our homepage to purchase conversion may increase with personalization, it simply won't make up for the marketing revenue we're getting by broadcasting her album to all of our users.

CEO: But won't this turn some users off?  Won't they go somewhere else if we don't show them what they want right away?

iTunes Marketing Manager: I suppose that's true, but hey, I have a big goal this month that I need to hit.  I can't worry about that now.

Of course I'm completely making up the facts and numbers in this conversation, but this is the logic that's driving decision making for many web services that can personalize but choose not to.  It simply isn't profitable yet.  And most companies aren't willing to make the short term sacrifice to provide a better shopping experience in the long run.

That said, I do believe at some point the large web services' personalization tools will get smart enough where the increases in conversions from personalizing a site will outweigh their fixed marketing revenue.  But it's pretty clear to me that that reality is pretty far off.

Songkick

I like to say that there are two things that motivate customers: fear and greed. 

Songkick, a web service founded in 2007, addresses a very simple and common fear: not knowing when one of your favorite bands comes to town.

I signed up for the service a few weeks ago and I love it.  It has a very slick and simple UI/UX.  You simply “track” your favorite bands and the site builds your own personal calendar of events.  It then makes recommendations for similar acts that you should track.  You can also import your favorite artists from Pandora, Last.fm and iTunes.  One thing I’d like to see them add soon is a second calendar that’s full of recommendations that you haven’t yet chosen to track.  That would be great for nights when you just want to see some live music but one of your favorites isn’t performing. 

Once you’ve setup your profile and created your own calendar, the system will send you an email when a show from one of your favorite bands gets scheduled in your area (I've already received a few of these emails and it's pretty exciting when you see one in your inbox).

In short, Songkick has executed very well on an awesome idea.  If you like live music, you should definitely take a few minutes to sign up.

Linking Credit Cards to Deal Sites

Fred Wilson had a good post yesterday titled, Syncing Up Your Credit Cards.  In it he makes the case that there’s tremendous value coming from linking our credit cards with innovative web services.  He uses BillGuard and Foursquare as examples. I posted a comment on the post that triggered a pretty interesting discussion.  My comment points out how I believe that linking credit cards back to deal sites creates an enormous market opportunity for better ‘deal making’ and better merchant marketing.

Rather than reiterate the comment, I’ve posted a screenshot of it below.  I’d encourage you to go back to Fred’s post as there’s some very interesting discussion happening in the comments section.

Jobs and Young People

I was talking to  a friend the other day about the value of children starting to work at an early age.  I think it’s a critical part of building and shaping a young person’s work ethic and eventual ability to create value.  As a young person working, you get to see the correlation between effort and return, understand the spectrum of hardworking people that produce and lazy people that don’t.  You build relationships, learn how to manage up, learn how to add value and how to get what you want from work relationships. Personally, my parents strongly encouraged me to work and work hard at a very early age.  While I’m sure I didn’t like it at the time, I know I can thank those experiences for the work ethic and ability to produce results I have today.

For fun, I took a couple of minutes to jot down some of the jobs I’ve had over the years (I tried to put them in somewhat of a chronological order).  I'm sure I forgot some so I'll add them as I think of them.  Regardless, I can't even begin to count the number of important lessons I've taken from each of the jobs on this list.

1. Newspaper Deliverer
2. Playground Supervisor
3. Altar Boy
4. Camp Counselor at a Baseball Camp
5. Dishwasher at a Private School
6. Babysitter
7. Dogsitter
8. Basketball Referee
9. Baseball Umpire
10. Landscaper
11. Mover
12. Snowplower/Shoveler
13. Waiter at a Nursing Home
14. Golf Accessories Salesperson
15. Dishwasher at a Seafood Restaurant
16. Lifeguard at a Lake
17. Parking Attendant
18. Swimming Instructor
19. Lifeguard at a Pool
20. Lifeguard at the Ocean
21. Fitness Center Supervisor
22. Certified Personal Trainer
23. Entrepreneur – Accounting/Bookkeeping Business
24. Office Manager
25. Advertising Salesperson
26. Marketing Director
27. Business Manager
28. Nonprofit Co-Founder
29. Director – Business Development
30. Senior Director – Business Development

3 Elements of a Marketing Email

Here are three very simple things that should be included in every marketing email you send.

1. Value Proposition (why should I care?)
2. Call to Action (why should I click?)
3. Urgency (why should I click right now?)

Ideally, they’d appear in that order.

Scaling an Internet Business

I built the chart below to illustrate a few points about internet businesses.

1. The chart shows the virtuous cycle that comes from sites with user generated content.  YouTube's and Facebook's products are their users.  Their users generate videos and photos that make the site more valuable.  More value, more users, more value, more users.
2. This cycle doesn't exist as cleanly for deal sites.  Their product is deals that come from salespeople.  If they want more deals, they need more salespeople.  That's expensive (they have 4,000 of them).  Certainly, more users make their salespeoples' pitch better, but that cycle doesn't happen neatly.
3. Groupon has a a huge advantage when it comes to conversions.  People come to Groupon to shop; their deals (i.e. ads) are their product.   Conversely, people do not come to Youtube and Facebook to shop.  Their ads are a distraction.  Because Facebook and Youtube make money by distracting people from what they want to do on their sites, Groupon arguably has a more sustainable model.
4. Because Facebook's and Youtube's products are their users and Groupon's product is their salespeople, it's interesting to think about how much incremental value their engineers are adding.  Youtube and Facebook are mostly made up of engineers.

When you build a consumer internet business, don't assume that it's going to happen like it happened for YouTube and Facebook.  Think through whether your value will build on itself or if you need to buld it incrementally, the old fashioned way.  It's also crtical to think through where your scale is going to come from: users, salespeople, or engineers.  The answer isn't always clear.

Drip Marketing Framework

A colleague of mine drew this framework on our whiteboard the other day.  I thought it was spot on so I'm posting it here. It basically outlines the drip marketing process that a salesperson uses to keep a prospect engaged.  I wrote about Drip Marketing in an earlier post.

The framework instructs you to drip the prospect with some information, if you get their attention work to understand what matters to them, if you know what matters to them align your product/service (if possible) to meet their need/pain point.

It's Not Viral Marketing

I wrote about this in an earlier post, but I think it's worth a reminder. Viral Marketing is not:

Telling your friends to Tweet about your new site.

Posting about your upcoming concert on Facebook.

These are simply modern ways of doing old fashioned push marketing.

Viral Marketing is when:

1. one person tells two people about your product (3)
2. each of the two tells two more people (7)
3. each of the four new people tell two more people (15)
4. each of the new 8 people tell two more people (31)
5. each of the new 16 people tell two more people (63)
6. each of the new 32 people tell two more people (127)
7. each of the new 64 people tell two more people (255)

You get the idea.

Viral marketing is when word about your product spreads, naturally, like a virus; and frankly, without much effort from you. Other than making the product worth talking about.

Your Social Network Asset

Currently I have about 80 followers on Twitter, about 500 Facebook friends and about 500 LinkedIn connections.

There's some overlap between networks, but more or less with a few keystrokes I can send a message to 1,000 people that trust me and are attentive and willing to listen to what I have to say.

That is an asset. A social asset. Not only the captive and trusting audience but the ability to communicate to that audience in real-time, whenever I want and as often as I want.

Like any asset, I can make it more or less valuable over time, either by losing or gaining audience, losing or gaining trust, or losing or gaining attention.

I think it's worth thinking about this for a few seconds next time you want to post something you want people to support. Will it make your social network asset more or less valuable?

Email and E-Commerce

Fred Wilson had a post last week called Don’t Forget Your Logged-Out Users where he discussed how social media sites need to pay attention to the value they create for users that aren’t logged-in; i.e. Twitter allows you to see Lebron James’ Tweets without logging-in.

This is something I’ve thought about a lot in the context of e-commerce.  You need to be very careful about what value you provide to a user before you force them to authenticate (i.e. force them to give you their email address). 

Most web services drive the majority of their traffic through email – especially repeat traffic.  As a result, email capture for a new visitor is critical.  It’s hard to get a user to your site, it’s even harder to get them back – in most cases you need their email address to get them back.  An email address allows you to regularly market to that user to bring them back when you have a better or more relevant offer for them.

So when you think about how much value you provide to a user that isn’t logged-in, you need to consider the potential missed opportunity to capture that user’s email address.

I’ve found that when you put up a authentication page before allowing a first-time user to shop, you lose about 20% of visitors; most users came to your site to see what you have and they’re willing to take an extra step to see it.

I’ve also found that when a user comes a site, there’s about a 5% chance they’ll transact on the first visit. 

Think of it this way:

Scenario 1 – Authentication and email capture before user can shop

1,000 New Visitors

800 New Email Addresses

40 Transactions

Scenario 2 – No Authentication before user can shop

1,000 New Visitors

50 New Email Addresses

50 Transactions

Here’s the question to consider when making the decision on how much value to provide to users that aren’t logged-in to your e-commerce site: what’s more valuable to you, 10 transactions or 750 new emails?

Career Insights

Picked up a couple career insights that I thought were worth posting here:

The first comes from a study from the Gamut News via Penelope Trunk's blog.

The study looks at what they call "Career Limiting Habits" or (CLHs) -- habits that prevent professionals from being successful. They surveyed 972 people and found that these CLHs were the most common:

1. Unreliability
2. “It’s not my job”
3. Procrastination
4. Resistance to change
5. Negative attitude

I think this list is spot on.  And it's especially true for startups.  It's almost the exact opposite of a list of habits required to work at a startup.  A top 5 list of positive work habits required to work at a startup would look a lot like this:

1. Accountable for individual and company results
2. Willing to do anything to get the job done; gets hands dirty
3. Starts fast, iterates like crazy
4. Embraces change
5. Positive, must-win attitude

Even at a larger, more established company, if you're practicing any of these CLHs you're making your manager's job harder and if you're making your manager's job harder, you're not going to go very far.  

The second couple of insights involve working with headhunters and come from a guest post on Dan Schawbel's blog about personal branding. Dan is a fellow Bentley alum.

Two pretty straightforward insights that might be useful to know:

1. A headhunter will not find you a job if you are not currently employed
2. A headhunter will not find you a job if you're not working in their area of focus; e.g. if you work in pharmaceutical sales and the headhunter is looking for a candidate for an advertising sales job, the headhunter will not work with you

This isn't to say you can't get a job in ad sales if you're working in pharma sales.  But a company isn't going to pay a headhunter 30% of a first year salary for a candidate that isn't currently employed and working in their defined area of expertise.  They don't need a headhunter to land that person. 

If you find yourself looking to make a career change, your best bet is to work through a more traditional staffing agency, go to companies through your network, or reach out directly.