Daemon. Leinad Zeraus. 2006. ISBN 978-09786271-0-2. A fictional story for our times. Written by an IT guy with some pretty scary ideas. This is not in the league of Enders Game or Neuromancer, because it is telling a foreboding tale that could occur now. There are a few phrases from this that may come into common speech such as “dark-net” or “accept the Daemon”. One writer even said that Google could be the “Daemon”. Very good pace, even storyline and if you know a little about MUGS you will enjoy the book even more. I liked it.

Social Intelligence. The new science of social relations. Daniel Goleman. 2006. ISBN-10 0-553-80352-2. I like it when a science writer (NYTimes) is also a smart scientist. This was a surprisingly good read considering I never did finish his Emotional Intelligence book. The core thesis is that social intelligence was developed as humans lived in social groups and it allowed us to identify leaders etc and live together. In our brains there are apparently two routes that this follows , the very fast reactive, (gut instinct) low route and the slower analytical higher route. Since I have at times been accused of diminished social intelligence, I had probably had lots of room to grow in this direction. He covers development stages from post natal through to adulthood, fascinating stuff as I recognized behaviors that my children had exhibited in the fist few months of life. He shows applicability of the research in schools, healthcare , politics and the work force. This is also a personal lifestyle book with lots of applicability to HR departments and leadership. Its a good size, 334 pp, very readable and it flows well. I recommend it

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Your management sucks. Mark Stevens. 2006. ISBN 1400054931. The author of Your marketing sucks is back with a lambaste to management worldwide. He must have been inside most of the Boardrooms I have presented in over the last ten years, ’cause he really knows what goes on. But he knows how to fix these companies! Canadian CEOs should all read this book and take the words to heart. (By the way he has advised Intrawest for many years). In our practise we are willing to lose clients if they are unwilling or unable to face the truths we bring them. Stevens does more than give business the truth, he slings it. If you chose to read this book, be prepared to be energized, uprooted and challenged at every turn. It will not be business as usual at the old taco stand in the AM. I am 100% behind him that consensus building, balance and “quality time” can rip the stuffing out of a company’s competitive edge. I see a growing erosion of company productivity everywhere I look. We have seen the competition in Eastern Europe, Asia and South America, they play to win and we are the enemy. Business is not kindergarten. There is no free pass for the mediocre CEO any more. If you are not growing more than anyone else in your segment, you are in trouble! Get this book, read it, (it does not take long) and change!

1. What did they do to drive large quantum leaps in user growth? Did they do any sort of joint venturing, partnering, or anything else that allowed them to grab blocks of users? This was easier than expected as investors and partners are monitoring this space closely, so every day there are serious inquiries from around the world. They can roll -out “white box” branded sites just like Match.com has done for AOL etc. Theirs will be free, using a fast follower model.

2. What about business fundamentals like customer segmentation? Did they set out to find a particular subsegment? Did that work? Very much so, the demographic analysis indicated an under-served market segment of between 18- 35 yrs old females. That was the first target market and it drove all the site attributes. The over 50 yr old female market is the next one being addressed. Since the Chinese market is so vibrant the first international push is the Chinese language site.

3. What about business fundamentals?

• Did they have a business plan up front? Not documented
• Or a go-to-market strategy? Very much so
• Were they building it from the front as a disruptor to an established player and hoping to be acquired?
  • Not so much as this was the way they felt a community of like minded people needed to be built.

4. How much were they willing to “get eyeballs first” before worrying about revenues? They are already funded for three years of no revenue, but six months in, the ad engine is built and will be switched on shortly.

5. How much of this is transferable to a non-dating type of social network? Dating has the benefit of being driven by a low-level sex and partnering drive in humans. So you have a high TUODF

• Target audience: MASSIVE
• Utility to them: HIGH
• Ongoing Duration: LONG TIME Even once they’re partnered they often stay on; Daily duration: driven by the above noted drives, dating sites can get up to one hour of time per day from a user
• Frequency: Usually have high frequency use;

How much of this is transferable? The partners have identified several projects were they see parallels to their present market. Dating was one aspect of social networking to prove the concept with a well defined revenue market and entrenched competition.

6. Metrics: What are they using for metrics? They are well versed in Google Analytics and use that as the major tracking device. Check out Avinash Kaushiks blog http://www.kaushik.net/avinash/ for lots more.

7. Adaptation/mutation: Are they doing any sort of manual or automated A/B testing of modules, content, headlines, buttons, or any other design elements? Yes, new mods etc are tested in separate live sections of the website to measure the member response. Not so much an A/B system since the cost to roll-out is so low and its quick. They use eye mapping and page tracking to create appealing and high utility websites. There was a lot of very recent research applied to the website design elements. Now the site is a live laboratory.
Are they tracking any sort of attention data (where users mouses track generally vs. specific button clicks) Yes.

8. So who are they? I can tell you in a few months.

No Yelling. The 9 secrets of Marine Corps leadership you must know to win in business. Wally Adamchik. 2006. ISBN 0977900509. I have looked at a few of these books (Warfighting) on the Marine Corps. This one is very useful for all business people concerned with essential leadership. If you have been as lucky as I to work with good leaders, you will see these people in this book. If not, this a book of life lessons. He askes tough questions. “What is your training program? Your reading program? Your Commanders intent? Your rehearsal for success strategy? ” In our practise where we often meet young breakthrough entrepreneurs this would be a very helpful book as new issues arise for them. The lessons are very useful at the small unit level, which are often the tough spots for start-ups. The writer has been in the Marines and business. He certainly makes a very strong case to hire ex-Marines. He also helps disprove the ” Hollywood” marine story. Easy read and well laid out.

Valuation = What Do You Want to Buy?

1. Team buy
2. Infrastructure buy
3. Market access buy
4. Movement attachment
5. Reduce your operating costs
6. Increase your potential

1 . Team buy
Pricing for a team these days ranges from $200 000 per member at the lowest level for $2M for rock star in recent deals we have seen. In our case we have attracted five rock stars from Asia and North America plus we are growing two almost-theres. So do the math.
2. Infrastructure Buy
For a web 1.0 company to design and build a new Web 2.0 site (with the correct look and feel ) might require an investment of six months of rock star planning ( $1500 per diem for 120 days ~ $180 000) with three months of rock star building (3 * $1500 * 60 days ~$270 000) and hardware costs (of approx $300K to find, build, test) for a net value ~ $650 000). Of course you still need the team to do this with.
Then you have unknown present data/content conversion costs to bring your members over to the new site.

This number has been validated recently by two different requests to us to build each client a single language Web 2.0 website. Cost was not an issue to them. Talent was.
3. Are you buying a Regional Market access?

Present individual, non integrated language specific small sites are being bought for a range from $10’s of millions through to $100 ‘s millions by all and sundry. If it is a large US site, valuations are ranging into the billions. Our site is the only unified platform based site n our segement. We already have 28 regional websites with domains in 17 languages in the can, ready to launch. Do the math.
4. Movement attachment
Attachment to the correct movement that has legs, emotion and the correct demographic is worth millions alone in free advertising and reduced lonfg term costs. Left to grow our site will only gain in value every day.
5.Reduction of operating costs
We know our operating costs are certainly 1/5 that of a “traditional” site. Perhaps even less. If you were a traditional mulit million dollar web 1.0 site, how would you reallocate 4/5 of your expenses next year? What would it be worth to you?
6. Increase your potential
There may be always a place for free and paid sites. Projection’s in dating expect that paid sites will grow about 4% 2007, while free site membership growth is in the double digits. Paid sites will no longer be a cash cow unless they move their infrastructure to a much lower cost model while ensuring a clear value definition to new members. If sign-up rates do not improve along with today’s 65% dissatisfaction survey results, then:

• churn will grow and
• revenues will fall.

So what is it worth to a Web 1.0 subscription model to ensure survival? Is this not a bet the company time? Live? Die? We think our model holds the future. Our model is simple, watch where subscription sites grow a market and then be a fast follower. There is always a market for a free product.

So what valuation would you put on this model? In our case we do not need to sell, since the model is a money machine today. However having more money could just help us make life more interesting for the competition.

Next: Responses to questions and comments on this series

Company Purpose is a Community Purpose

1. Tie to a movement
2. Use Web 2.0 viral growth models
3. Community policing
4. User content is free

a.

1. Tie to a movement
All people involved in our project (employees, clients, partners) are a community of like minded folks. This drives passion to make a change, to have an effect. Branding is achieved via a halo effect. i.e. if our intentions are good, and we mean to do good, we become good. Affiliation with a large movement drives down air cover marketing. Our costs to drive traffic are driven way down. If the movement is large and in the popular realm, then this just increases site value to advertisers as a means to better reach a targetted demographic. In our case advertisers think people will spend green to be green.

In any case paid ad spending for this segment is increasing. In 2006 True.com paid $90 M for advertising costs, Eharmony over $117M, Chemistry’s “Rejected” Ads were $10M. For paid sites it just gets harder and harder and takes more of their budget to maintain their advertising.

2. Web 2.0 viral growth
The web application cost is in supporting the spectacular member growth with hardware, not ads (since ad costs can be mitigated). All growth is self supporting. Members invite their friends. Web 2.0 site response rates support what members want, instant gratification, sign –up and you are live now! As a result SEO ranking grows and grows (Our Alexa ranking grows 10 000 spots every two weeks – with minimal marketing dollars).

3. Community policing
As your community grows they self police using our tools. They bring to light issues and report any misuse or misrepresenetation very very quickly. This removes a huge amount of administration and vetting costs. It is as much the users’ site as the company’s site which increases their attachment to pages, driving up stickiness. and reducing member churn, a big cost to “paid” sites. Reducing churn and driving down site operating costs drives up the company valuation.

4. User content is free (and it is topical)
User driven content really increases SEO ranking (more content, more links, more spider hits). This reduces our direct creation costs and improves our regionalization efforts. We have found this increases the number of site visits, prolongs attachment, visit times and frequency of visits. Also we notice North America is just beginning to get the degree of attachment to these issues that we already find in Europe.

Next: Valuation depends on what you are buying.

Bit Literacy. Productivity in the Age of Information and E-Mail overload. Mark Hurst. 2007. ISBN 0979368103. Seth Godin calls this the Elements of Style for the digital age. Its true, written  by a  geek, he questions how and why we use technology in certain ways. His insights are good and suggestions will definitely help anyone cope more effectively with the bits flying at us. I am a fan of being organized upfront and he is too, but he helps you also crawl out from under the load.   His suggestions on handling photos and reworking file naming are very smart. Likely the most thorough analysis on the market today and it is straightforward to read and apply.  Microsoft could learn a lot from his suggestions.  His ideas will free you from a vendor dependence

Add-On Selling. How to squeeze every last ounce of sales potential from your calls. Jim Domanski. 2002. ISBN1881081117. You may not have heard of this Canadian telesales expert, but you should. He is one of the businessbyphone.com authors and I received this and two other books in a clear out set from them. What a bargain! Not only does he cover add-on, cross-sell, upselling on the phone, he has sections for converting  inquiries, cancellations, complaints, customer service calls into sales. His approaches are just as useful face to face. A no nonsense straightforward easy read, this is a library keeper. His section on getting leads and referrals is bang on the money. Check out www.businessbyphone.com (This is treasure house for telesales answers

)

The Gold is in the Rest of the World

• Be International from Day 1
• Unifying platform from the get go
• Cultural and demographic data is Holy Grail

Be international from day one. Ask yourself the following:

• Why would Fox buy a small German Facebook lookalike for $90M?
• Why is Mixxi valued at $1B?
• What drives Orkut to No 1 in Brazil and No 2 in India? (same traffic stats as MySpace)

There is an international land grab going on by media companies for international social media sites. They see the “land” i.e. registered members, as almost free today but worth a phenomenal amount in the future. This drives valuations which only appear to be sky high but we all know the value of the international market from previous lives.  The US market already has over 850 sites for dating alone!

Build a unifying platform from day 1 using front and back end modules.

You must allow for smart ads, e.g. location, gender, language, interest based advertising today. Every “site” or “skin” feeds all data to one intelligent data base. This is a business flaw for all the media giants who buy disparate sites. At what cost will it take to unify all their data after a buy? Can they even do it after the fact? We think not in a  re-usable form. Build it right at the start. Build to beat competition in all locales, not to buy regionally. Build in data migration tools “just in case”. Thus our data grows hourly from 28 sites in 17 languages as does its value.
Data is the Holy Grail and it drives everything

• The increasing valuation of Google, why they bought YouTube and considered it a bargain
• Purchases of sites for large sums by FOX, CBS other media giants
• Aggregation by Google and Yahoo of ad companies like Doubleclick

So how much does Coke pay today to know the interests and buying habits of a 30 yr old Caucasian male in Northern German, how many there are like him, the languages they speak,  and what they like or dislike today? Do they have it in real time? Even daily? Monthly? Tailored ads based on location, and recent interests can now be served up on GPS aware mobile phones, laptops, Blackberrys.  What would a major vendor pay to know this, to do this? “Sanitized ” data about you exists now. eg your Air Miles or Costco card profile tracks all your purchases for internal use, repackaging and resale. So what else makes Airmiles worth so valuable as a company?

Next: Company purpose is the community purpose