Emergent Business Networks

Let’s call this the Prince strategy (“artist formerly known as Prince”, sorry!) We have called them readers, subscribers, eyeballs, circulation, audience, listeners, friends and community. Coming up with another term would almost certainly get it wrong and needlessly cause people to change their business cards yet again (Circulation Manager to Audience Manager to Community Manager?) So Prince it is. At least it sounds respectful ☺

Paul Conley has a good comment on yesterday’s NYT articles on the future of media and the implications for B2B Media. The message, B2B Media is missing the boat. This is not a minor issue for B2B Media CEOs. It looks like we may be heading for another recession and it is not clear that the boats are in good shape for a storm that may be a lot fiercer than the last one.

I have to make two warnings about this post. First it is rather long. Sorry, as Oscar Wilde said, I did not have time to write a shorter letter. Second it is not a feel-good post, more like a wake-up call, so please read it when you are feeling robust! However please do persevere as I will propose a strategic direction, not just ask a bunch of awkward questions.

Advertising gets cut in a recession because, as Sam Wanamaker famously said, “50% of my advertising is wasted I just don’t know which 50%”. So the marketing manager defending her ad budget (in a grueling meeting to discuss “what do we cut to hit the CEO’s 10% cut mandate”) has a hard time coming up with the numbers to justify holding the line for your titles. That’s when your ad sales executive gets the dreaded call.

In the past, traditional advertising has always bounced back after the recession. It’s probably going to be different in this cycle, because there is an alternative that is measurable. Advertising will always bounce back, but some types may not. A cyclical trend (from growth to recession) amplifies a secular trend (to measurable advertising). Whether it is behavioral targeting or search engine targeting based on a the “database of intentions” or any of the other myriad schemes dreamed up by Web 2.0 techies flush with VC cash, it is all about measurable, accountable ROI.

That marketing manager can now say “OK we will cut total ad spending by 10%, cut traditional media by 80% and allocate what’s left to the measurable alternatives we have been piloting and see if that moves the revenue needle”. She at least keeps her job.

This is not about print versus online. All those statistics about the tipping point where B2B online revenues exceed print revenue are beside the point. Online CPM advertising is no more measurable than print display advertising. Attempts to measure CPM effectiveness through clicks are extremely counterproductive. The click-through cost will look incredibly weak compared to SEM and you will end up rather defensively saying “no, actually, it is all about brand impact and you cannot measure that”.

Nor is the answer a knee-jerk response that we can “deliver more leads”. That will help short term and may need to be done, but at best it will be playing catch-up with Google; you cannot beat them on lead volume. There has to be a strategy that leverages the genuine sources of competitive advantage within B2B Media and that “moves to where the puck is headed” (as the ice hockey loving CEO of Sun liked to say). Or as my cricket-loving friends in India and England like to say, “get off the back foot”.

A forward-looking strategy has to face up to an ugly word – “deportalization” – and the harsh reality that it represents. This word signals the decline of destination sites, caused by the ability of search engines to find whatever you want reasonably easily. As a quick reality check, look at your own online habits. This affects first generation online sites as well as traditional media. Why go to multiple job sites such as Monster and HotJobs when a vertical search engine like Indeed or Simply Hired can do the job for you?

So your online site, the hopes and dreams of the company and recipient of all the forward-looking investment dollars, may not be the source of competitive advantage that you need.

The sources of competitive advantage for B2B Media are simply not what they have been in the past:

• Content? Not any more. We are awash in content and software is getting better every day at automatically searching it, aggregating it and displaying it in meaningful ways.

• Brand? People don’t search for information by brand.

• Bundled deals? The online only guys don’t have print and events so we can put together a compelling package deal? If this does not hit the measurable ROI objective, bundling is simply cross-subsidization that leads to internal conflicts and lower returns on the components of the package.

• Advertiser relationships? Unless you can show measurable ROI, the relationships will fade.

I believe that B2B Media has one critical, fundamental source of sustainable competitive advantage and it is summed up in word – trust. The old joke about the Internet – nobody knows you are dog – is still true. Authenticity, rigor and ethics matter when somebody needs to make a quick judgment call on “can I trust this source to help me make an important decision?” This is not about translating the print brand online. This trust is earned every day, on every page.

Trust leads to attention, which is the new coin of the realm. The attention economy is a simple take on the never-to-be-repealed law of supply and demand. When the supply of content explodes and demand remains constant, attention is what matters. Note that attention is not simply eyeballs. Trust is the difference. In the B2B world the ideal of trust is 30 minutes of a CIO with a $100 million discretionary budget reading an article/white paper/blog with rapt attention as if his company depended on it.

Unfortunately the critical, strategic need to protect this trust bangs right up against the urgent, equally critical need to show a measurable ROI now and boost revenues now by delivering more leads.

This short-term imperative leads B2B Media firms abuse their audience by:

• bunching telemarketing calls around audit cycles so everybody is pestered at the same time,
• giving the email list to anybody who wants it internally,
• renting the list with email and phone numbers to anybody who will send a check,
• contacting people multiple times by email, phone and post without even being able to answer the question how many times we have contacted that person,
• contacting them again in different ways for print, online and events,
• contacting them again on behalf of a webinar, survey or whatever else we have just sold to the “people formerly known as advertisers”.

This is a long way from the world that publishers grew up in and that has fundamentally been the same for about 100 years before the Internet. In that world, I read a magazine and nobody has the faintest idea what I am thinking about, unless I write and post a letter to the Editor and only rather eccentric people did that. As readers we liked that. As advertisers we had learned to live with it. As publishers we felt no conflict of interest and knew that as long as we created interesting content the business was fine.

Strangely enough for a self-confessed technophile who is pushing to the future, I believe that B2B Media needs to return to this old-fashioned anonymity. The reason is trust. If we lose that we have nothing. So I agree with the editorial purists represented by Paul Conley.

We are about to witness the loud noise and mess that happens when an irresistible force meets an immovable object.

The irresistible force is personalization. This is the key to online research productivity. Personalization technology cuts through the clutter and saves time. The firm that delivers personalized content sits at the top of attention economy food chain; all other content is “drive-by commodity”.

The immovable force is privacy. The privacy backlash is building. Today it is only techies who are aware of the issue and where it is headed, but when mainstream users get spooked by a few more high profile or highly personal cases, we will see consumer backlash and then, with politicians on the bandwagon, more regulation.

The fact is, as niche content producers, B2B Media cannot win the personalization game on the current rules. Behavioral advertising networks (in future all advertising networks will work this way) have access to Prince’s behavior across hundreds of high volume sites and Google sees every search that Prince does. You cannot compete with that.

You can compete based on trust. Personalization is based on data provided by Prince. There are different types of data and they have different values (skip this if you already know it):

• Volunteered data. This is the most valuable, because it is freely given in exchange for something of value. A controlled circulation magazine works this way; the qualification form is a form of “contract” between reader and publisher, mediated by BPA. Unfortunately the value of a print magazine is declining (the same content is available online without registration) so it is increasingly hard to get people to fill in those horribly long qualification forms that seem like they are from another era (they are). Also publishers are breaking the relationship of trust (although not the letter of the contract) by too much contact. However there maybe ways to get Prince to volunteer data based on a different contract – more on that later.

• Observed behavior data. This is what behavioral targeting networks do. They observe your online behavior – through cookies – and infer interest that they sell to advertisers. It is very powerful stuff and kind of spooky when done right. I watched the Tacoda founder present by asking a quiz to see what would be the best predictors of propensity to rent a car from Alamo and it was weird things like the person had visited sites about funerals (a relative has died and I need to visit the family and that involves renting a car); as I recall, other predictors included renting a romantic movie and visiting NFL sites. The point is that a) this is an imprecise and evolving science b) it can be very, very wrong in hilarious ways and c) it can be bang on target in such a way that it spooks the user.

• Derived data. This has been a staple of consumer marketing for decades. This simply derives Lifestyle/Lifestage assumptions from known data such as zip code, age and occupation. This does not infringe privacy. Nor does it enable personalization. It simply allows basic segmentation such as Baby Boomers want content about travel, health and investments.

The key to getting more volunteered data is a new contract with Prince that will encourage him/her to volunteer more data. A contract, whether verbal, legal, online or just implicit, is something representing trust. B2B Media needs a new contact that goes beyond the controlled circulation print model. Online there is no contract at all. We just serve up content and then serve up banner ads to whoever turns up. This “no contract” model was based on the desperate desire to get online visitors and the fear that asking for anything would turn them away. Online the move is to make it even easier with initiatives such as Open ID and Data Portability.

However that online “no contract” model does not enable a new contact with “the people formerly known as advertisers, list renters, webinar sponsors, exhibitors and so on”. To avoid confusion with the other Prince, I will simply call them Marketers. That new contract needs to put B2B Media back in the central position in their budgets and plans that was enjoyed in the halcyon days before the Internet.

That is not easy but it is possible.The lives of publishers have become more complex. The lives of marketers have become even more so. I have spent more years as a marketer than a publisher, so I remember when the choice of marketing tools was much less, but also when the “noise” that one had to compete with to get one’s message across was way, way less. Marketing in an ADD (Attention Deficit Disorder) world is hard.

Publishers can help, by rigorously enforcing their contract with Prince and then delivering Prince to the marketer in a way that is win/win for Prince and marketer.Lets get back to those precious leads that every marketer wants. Targeted lead generation enabled a B2B Media firm focused on technology to raise $100 million in the midst of the technology nuclear winter in 2002 and to “exit” with a successful IPO in 2007.

So all we need to do is crank up white paper registration and business reply cards and other lead gen techniques?

Not really, because these “pulled” leads are random for the marketer. We don’t know how many we can get at what time intervals and what the lead quality will be. So the sales team doesn’t bank on them to make their numbers. So leads trickle in and fall on the floor; 80% of leads are wasted, with no follows up. For a lead to get followed-up, it must be the right lead (relevant interest, right decision-maker, in the right market segment), with the right information about the lead and it needs to get to the right sales person in the right division and region and all of that has to happen today so the sales guy can call while the lead is still hot.

Now look at what happens to the leads that do actually get followed-up. The sales guy makes a call or sends a mail or does both at different times. In the best case, Prince really is a lead; he has a budget and an immediate need for a product sold by that sales guy. In that best case, it takes multiple rounds of tag to set up an online demo, presentation or telephone call. In the worst case, the lead is not really a lead (another vendor, early stage curiosity or just plain mistake).

The cost to follow up on bad quality leads is high; it is better to have no leads than bad leads. Most sales guys complain that marketers deliver bad quality leads. If publishers can deliver good quality leads they will win the undying love of marketers and sales people – and that’s worth big money.

There are three keys to delivering that lead quality on a consistent basis:

1. Allow the marketer to define lead quality – what companies and job titles they want and what product categories and how they want to make contact. From this define an economic value for a lead that meets the criteria. This economic value can be way, way higher than we think as publishers. A highly relevant lead for a $1m sale is worth how much?

2. Allow Prince to do all the research he needs on your sitewith total privacy. (using your content and content from other sites aggregated through your tools). Do the hard work to make their research easier. Go beyond Search to (Re)Search. Research is what Prince is really doing online. Don’t sell enhanced listings and any other type of paid listings type that distorts the value of the information. Allow Prince do all this totally anonymously and to determine when and how he wants to make contact with a vendor and how he wants to make contact and what sort of person that he wants to speak to at the vendor (e.g CTO not sales guy, which the vendor will do if Prince is a CIO with a big budget). Let Prince state a specific need; that has real value to the marketer. Never, ever give out any data about Prince without their express and specific agreement to do so for that vendor and that situation. Build that trust. This has been called “Vendor Relationship Management” and it was – sort of – what the analyst firms like Gartner used to do, except that they got paid by both parties and lost their credibility. The Internet puts power into the hands of the user/buyer/Prince. Work for the one with the power and get their trust. This does work for the marketer as they get a genuinely interested lead and don’t waste time on unqualified prospects.

3. Arrange the first meeting. That simple last step cuts out all that wasted lead problem and the lead follow-up telephone/email tag cycle. That pushes the lead way deeper into the marketing funnel and thus significantly raises the value. Arrange the right contact at the vendor based on the level of seniority and position of Prince. The first meeting will be online. It can be a publisher-mediated webinar where Prince could still elect to be anonymous (we can determine the value of that Prince but we don’t identify the name), or it can be a one on one webinar for that Prince only or a marketer mediated webinar that has multiple prospects attending that could enable some interesting dialogue between the prospects.

Those three steps are not easy. They are particularly tough for a traditional media firm with all kinds of legacy interests and relationships to protect. This reminds me of the old joke about the driver who stops in the country to ask a farmer for directions to Dublin and the farmer replies “Bejesus if you be wanting to get to Dublin I would not want to start from here“. This would be easier for a start-up. Which may indicate that this should be given to a skunk works team. If not you have to get everybody – print, online, events, editorial, sales, IT, finance – all pulling in the same direction while at the same time hitting all those immediate targets. It does not often happen that way.There is a lot of database building, cleaning and restructuring to do and that cuts across current organizational boundaries. There is lots of process reengineering to be done. There is lots of technology to be licensed, developed or partnered. However this is all easy if the organization is really aligned to meet this strategic goal.

Unless you have been meditating in a cave in the Himalayas, the hype about Facebook has probably come to your attention. A 23 year old turning down a $1 billion offer has a certain ring to it.

What about those of us who are paying for the kids who are using MySpace or Facebook? Is it possible for traditional B2B Media firms to make money from creating community sites?

I have heard the complaint that “it is easy enough to build the sandbox and people do come and play, but how do I make money from their play?” This is a tough question. In a real operational business, any project has to meet stringent hurdles for Return On Capital. There is not the luxury that some start ups have of just building traffic and then later figuring out how to make money. However the investment required is not great and, if there is money to be made, it is almost certain that some start-up will be looking at doing it in your market; so ignoring the question is not a serious option.

I see two big positives and two big issues (that may be negatives or maybe resolvable). First the two positives:

• Positive # 1. The cost of entry is low. Setting up a site is inexpensive and traffic does build virally if you build good features.
• Positive # 2. Users who contribute, share, comment, communicate are more loyal (aka “sticky” or “engaged”) than people who only read.

The two big issues:

• Issue # 1. These are not environments for grown-ups doing business. Do you want your readers hanging out in a place that looks like this? (Actually this is my brother in law and he is a really good wholesome guy, but you get the point). This is pretty easy to fix, it is really just a style/design issue.
• Issue # 2. CPM rates and click-throughs are low. This is OK if you have 30 million users (Facebook) but not if you have a controlled circulation audience around 50,000. You need every one of your community to count. They are important, influential people and not college kids with budgets for books and beer, so the potential is there but the $ per person must be way higher.

Google makes tons of money because they create a “database of intentions“. When you search for something you reveal your interest. This is not true in social networks. You don’t even have context to help target the advertising. This is like selling advertising on email systems. You are too consumed with writing or reading email to look at ads and if the provider serves ads that are based on what you are writing your privacy is invaded.

There is a possible direction for this that does make sense for B2B Media which tackles both big issues. First, lets drop the term “Social Networking”. Your readers (to use a terribly old-fashioned term) are not interested in dating (at least they don’t equate your brands with dating). They use your sites for “research”. Which is rather more than Search. (Re)Search is what we do after Search.

The best Research data comes from your community. If you build a “Research Network” (as opposed to a “Social Network”) that enables this to happen you will deliver value to your community and you may be able to create a “database of intentions” that can be monetized.

There is an excellent book called Wikinomics, How Mass Collaboration Changes Everything that I am currently half way through. I recommend it to anybody who thinks this is a passing fad for teenagers. There are complex issues to think through related to editorial control and the authentication of posters. In niche B2B markets, the totally open model of Wikipedia is unlikely to be ideal. A more balanced approach, between total editorial control and total open model will need to evolve.