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Don’t be fooled by the trend for advertising

Highway Signpost "Freemium"Freemium subscription model under attack

Back in May of this year SlideShare stopped accepting any new “pro” accounts. For several years SlideShare has operated the “freemium” model of business – free users get a basic service whereas higher levels of capability have to be paid for in a premium service. You see this throughout the web; many services are completely free of charge, but if you want the extras you have to stump up some cash.

The fact that SlideShare – now owned by LinkedIn – stopped taking orders for its Pro account was curious. After all, LinkedIn itself has a successful freemium model with around 25% of the company’s revenues coming from people who upgrade from the free service to a premium account. So why did LinkedIn abandon the same business model on SlideShare?

All was revealed last week when they announced that almost all the “pro” features would now be available free of charge, including analytics, the possibility to make slide decks private and the ability to brand your SlideShare profiles. Previously you had to pay a fee to do all that; now it is going to be free.

So how can SlideShare afford to run? The answer is the site is now going to introduce advertising. Just when you thought everyone had realised the online advertising is increasingly annoying to users, a major firm like LinkedIn is upping the game.

Advertising only works when you are big

The problem for SlideShare is that it only has around 60m users, compared with the 300m over on LinkedIn. At LinkedIn about 30% of the revenues come from advertising – yet, just as on almost every other online advertising platform, most adverts do not get clicked on. In a world where pay-per-click advertising dominates, most of us ignore the adverts. But if you have 300m people who log into your site and if a mere 1% of them click on an advert, that’s still a hefty 3m people.

In order for SlideShare to make money from advertising it needs to grow its user base – 1% of 60m is only 600,000 clicks, which is tiny in comparison. But how can you grow your user base when the features you offer have to be paid for? Answer, says LinkedIn, is to make them free.

When you have a massive user base you can make some real money online. Facebook, for instance, has almost 1.5bn users and generates a whopping $6bn or so a year – which means each user is worth about one cent per day to the business. Most of those users ignore the adverts. Most of us get annoyed by them, but move on, realising they are the price we pay for using the service.

Expect even more online advertising

The trend is for big firms to adopt an advertising route. They have toyed with the freemium world, only to conclude that they can make more money by getting higher numbers of users and delivering just a small proportion of them to click on an advert. SoundCloud, for instance, also announced the other day that it will be introducing advertising to its audio system. Meanwhile, Facebook is coming up with more ways of injecting sponsored items in to your timeline and getting you to see more advertising.

It seems that big online firms have concluded that the freemium model has limitations. As a result, they are going to find ways of adding more and more advertising to our “user experience”. Which can only mean they can expect the click-through rate to drop, meaning they need more and more millions of users to deliver value to their advertisers.

What will happen when we all get thoroughly fed up with advertising and we rebel against these services? Well, then you can expect competitors to arise which do not carry advertising and which offer some services free with subscriptions for others. We will come full circle.

Categories: Internet Marketing

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Email marketing should be even more personal

Email marketing personalisation is focusing on the wrong kind of being personal

We have all had emails addressed to “Dear Firstname”, where the hapless marketer has inserted a “personalisation” code but has actually forgotten to gather any personal data about us that could be inserted into such codes. Sure, we find it annoying and we move on. Many such emails are probably deleted within seconds. Indeed, in a recent analysis of email marketing it was found that only 1.3% of email marketing to the “Business-to-Business” sector actually garners any real engagement. In other words, most B2B email marketers are whistling in the wind.

Chart displaying email subscriber activity

The study found, however, that in stark contrast there was significant engagement with email marketing from the healthcare sector. Indeed, 17 times as many subscribers to healthcare companies were engaged with the emails they were sent than was the case for B2B. It all suggests that those healthcare emails were much more interesting.

Make it personal

The real issue this study has uncovered is personalisation. Email marketers seem to think that “personalisation” is “Dear Firstname”. But that is not personalisation, that is just good addressing. Personalisation to the recipient of an email is “this is about ME”. That’s where the healthcare industry scores. Their emails are intensely personal; they are about the individual themselves. Many B2B emails, though, are “business-like” and about the company sending the message.

Personalisation means making the email about the individual recipient and their specific needs. That means when you collect email data you need more than “first name, last name”; instead you need to know interests, likes, dislikes and so on. You need to know what makes each potential reader “tick”. Of course, if you try to collect that information in a sign-up box, you reduce the number of people signing up – the more fields people have to complete, the fewer people fill them in.

So, you need to add this data to your email marketing system at a later date. You can do this through polls, surveys and ongoing customer research. Then you can include this information in emails which you send out so that the messages are much more personal.

The crucial thing which this new research shows us is that you gain more engagement when you make it more personal. Focus on them, as individuals not target groups, and your email marketing will gain greater impact.

Categories: Email

Online is good, face-to-face is better

Study shows preference for real world encounters

Two 3d businessmen shake hands in an office

Businesses and organisations the world over have for the past couple of decades been looking forward to the day when they can deliver almost all their services online. The theory is that this will cut costs, reduce staffing levels, improve productivity and increase efficiency. That is all nice theory. But mostly it is an assumption.

True, you can cut some costs. Email has dramatically reduced postage and distribution costs. But it has significantly reduced overall productivity and increased day-to-day administration costs due to the time it now takes to manage daily emails. The costs of email could well have outweighed the savings it can make.

There are other examples of cost savings from using the Internet which don’t actually turn out to be cost savings. A website may replace a printed brochure more cheaply, but a printed brochure doesn’t need a member of staff or an agency or an entire team to constantly update it and keep it fresh.

The potential savings which the Internet bring us are often mythical. Sometimes, using the Internet costs us more.

Customer research is more difficult

In the world of face-to-face business you conduct customer research constantly – you do it “live” using body language assessment, asking questions, having conversations and so on. To do that online you need complex analytics and someone to analyse the data and then someone else to reprogram your website to take into account what the data suggests.

In face-to-face, real world encounters, both parties can adjust their views, they can seek answers to specific queries and they can gauge the responses from tone of voice, body language and so on. Try doing that online; the web is nowhere near as efficient as a human being.

However, the Internet clearly does give us several efficiencies and possibilities. One of those is in education.

Self service courses online

There are plenty of ways we can learn things online, from self-service courses from a provider such as Udemy, to complete degrees from academic institutions such as The Open University. Educational organisations are rushing headlong to the Internet in a bid to sign up students from across the globe. But is it worth it?

There are very few studies of online education, but a new piece of research from the North Dakota State University shows that students prefer face-to-face. They found online courses more challenging and lacking in interaction.

Whenever areas of our life that involve interaction are studied, the preference always seems to be for face-to-face. That should come as no surprise.

Rather than organisations clamouring for cost reductions and efficiency improvements by going online, perhaps they ought to think about how they can cost-effectively do as much face-to-face as possible. The Internet clearly has a lot going for it, but when it comes to human activity, it is pretty weak. That means you could well be better off by coming up with more ways to meet your clients and prospects face-to-face.

Categories: Internet Psychology

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Should you start collecting more online friends?

Quantity – not quality – could be more important for social networking

The debate about the number of social networking contacts you should have has raged on for years. Indeed, even before the era of online social networking business leaders argued over whether you should cultivate a small group of contacts who you know well, or a large collection of people who you don’t have such deep relationships with. Is it the quality of your business network that matters, or the quantity?

This is a fairly polarised debate. Networking strategist Andy Lopata, for instance, argued that quality is more important than quantity in his blog post “Stop Playing the Numbers“. Yet another networking expert, Thomas Power, the founder of the world’s first business social network, Ecademy, argues that quantity is more important than quality, which he did in a recent edition of “The Global Networking Show“.

Online social networking has faced the same issue. Should you collect thousands of friends and followers or should you just focus on a small group. Professor Robin Dunbar has argued that we only have 149 people in our social groups on average anyway, something which has become known as “the Dunbar Number“. So how come there are people on Facebook with thousands of friends, or on Twitter with millions of followers? Do they know something we don’t? Have they realised that quantity is better than quality in some way?

As ever, research and testing can help provide the answer. Thankfully, research from social psychologists at North Carolina State University has found the answer:

Quantity beats quality.


Well, at least in terms of one measure – money. It turns out that the people who networked the most, who contacted the most people and who took every opportunity to build the number of people they were connected with were the ones who had the greatest increase in income. The people who focused on a smaller group of contacts, did not have the same degree of financial success.

So, at first sight, it seems that the psychologists have answered that age-old conundrum and pointed us in the direction of quantity over quality.

It seems sure, therefore, that if you build up your connections in your network you will make more money as a result.

Except all is not as it seems. Even though the research found that people with big networks made more money than those with small networks, it was the behaviour and attitudes of the people that were more important. The people with the big networks that made the most money were motivated by growth and advancement. In other words, they probably were making more money due to this characteristic of their personality rather than the size of their network. The network size is probably a reflection of their behaviour – they attract more people to want to connect to them because they are go-ahead people. They make more money because they are go-ahead, not necessarily through the size of their network.

It is not quality OR quantity

What the research really suggests is that you shouldn’t focus on quantity nor should you concentrate on quality. Instead, you should focus on your motivation. Concentrate on growth, on building your business and on reaching your goals. In doing so, your social network numbers will take care of themselves. You will inevitably increase the number of friends and followers as a result of your go-getting behaviour. But it will not be those numbers, on their own, that make the difference. It is your behaviour that will do that.

 

Categories: Social

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Amazon demonstrates it misunderstands pricing

Amazon launches massive campaign against Hachette amidst dispute about prices

ebook reader on bookshelfAmazon has emailed all its Kindle publishers and set up a website in the midst of its dispute with the American publishing company Hachette. The publishers do not wish to lower the prices of ebooks, but Amazon wants them to.  Meanwhile 900 leading authors have set up a website appealing for the dispute to end, criticising Amazon.

At the heart of the dispute is the pricing of ebooks. Amazon wants to lower prices, arguing that this leads to more purchases, increased profits and better royalties for authors. Leaving aside the fact that the company has used emotional tactics, linking their latest round of the dispute to the First World War, Amazon does have some impressive statistics available.

According to Amazon, if you decrease the price of an ebook by a third, you can increase the sales by almost 75%. Amazon uses this data to say that lowering prices will make more people read more books. They suggest that, in the world of multiple media, books have to compete effectively and that price is crucial.

Amazon’s basic error

Amazon, however, is making the basic mistake made by schoolchildren when they first start studying statistics. They are linking two sets of data and assuming there is a connection. The fact that more books are sold does not mean that more books are read. Indeed, there is plenty of research that even books which are valued by people get low readership. Many business books, for instance, are not read after purchase and if they are, usually it is only the first chapter, with readers dipping in and out occasionally. An interesting fun study, known as the Hawking Index, suggests that a wide variety of books get very low readership. Amazon has made the basic mistake of assuming that the purchase of something means greater use of those items. The evidence actually points the other way.

Amazon’s second mistake

The next problem with Amazon’s argument about the need to lower prices is that it assumes that people are driven by price. Decades of consumer research shows that this is emphatically not the case. Only when the seller starts to focus the mind of the buyer on price does the amount of money become the issue.

This is about psychological “framing”. The design of the Amazon website, for instance, frames the mind of the visitor into “cheap”. Therefore they expect lower prices. Once you have made them expect lower prices you have to start delivering. This is a downward slope, the ultimate direction of which is in ever lower prices, driving the need to sell more and more in order to stand still in terms of profit.

Price is about perception

Once you start lowering prices your customers start to devalue what you sell. If you price something highly, people value it much more greatly and with higher value you generally get greater usage. If Amazon is really as keen on getting more people to read, as its emotionally-charged letter suggests, then they need to RAISE prices to increase engagement. Lowering prices reduces the perception of the value of the book and with that goes lower usage, reducing readership.

Whilst it is admirable that Amazon wants to increase the number of books read, they have gone about this in completely the wrong way, revealing they misunderstand the psychology of price.

If your business wants greater usage of what it sells, lowering prices is precisely what not to do.

Categories: Online Business

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