The thinking behind our approach is:

• We want to look at the lasting impact these ads have on conversation volume. After all, if the ad is truly effective, it will inspire conversation beyond centered around the brand that may have been sparked by the ad but are no longer about the ad itself
• Amongst the Superbowl advertisers (and I bet amongst companies in general) Google already dominates social conversation so of course their ad will spark the most conversation too. (In our 6 month baseline leading up to the game, it had over 6 times as many mentions as the next most talked about brand, Intel.)
• The ads we love the most aren’t always the most effective. Some of the most beautiful creative doesn’t have any impact on consumer behaviour at all and vise-versa. We wanted to see what works; not what was most entertaining.

You can follow our analysis and our thinking around the Super Bowl here: http://bit.ly/auODbz

We’ll be updating it frequently as we develop more insight so keep checking back, subscribe, follow us on twitter or follow me on twitter

This morning @mikegelfond tweeted this:

From BrandweekDotCom Luxe Brands Glisten Again http://bit.ly/7ZWFPl

The gist of the article is that luxury retailers did very well over the holiday season and even though the article also cautions that we shouldn’t take this as a sign that the luxury category is back since shoppers tend to splurge at the holidays and then pull back sharply in the new year when they see their bills, I couldn’t help but wonder: If the luxury category did well, how did discounters and middle of the road brands do over the holidays?

So lets take a look at some retailer same store sales results for December, 2009:

Discounters

Wal-Mart 0.5% decrease

Target 1.8% increase

Family dollar 2.4% increase

TJ Maxx / Marshall’s 14% increase

K-Mart 5% increase

Kohls 4.7% increase

Middle

Sears 4% decrease

American Eagle up 9%

Limited brands down 2%

JC Penny down 3.8%

Gap 2% decrease

Luxury

Saks 5th Avenue up 9.9%

Nordstrom up 7.4%

Macy’s / Bloomingdales 1% increase

Tiffany up 8%

source: Marketwatch

Is this complete? no. but does a clear trend emerge? yes. Even in a recession the trend of consumers trading up in categories they are passionate about and down in categories they don’t really care about continues.

The clear implication for business model design is don’t create products or experiences that land you in the middle of the discount – premium landscape.

Later this week, I’m going to write about what I think this means for digital marketers.

OK, OK. A study by the direct marketing association crowning email marketing as the most effective is highly unbiased, but still… even if it isn’t at the very top of the heap, it’s still pretty good.

All that to say, direct marketers have done and continue to do a lot of things right that social media marketers can learn from. Here are three of those things:

Be focused on numbers and refine everything

There’s a debate in the social media corner of the twitterverse / blogosphere as to whether social media marketers should measure ROI or just measure other, more upstream metrics. Personally, I think every marketer should measure ROI for any activity and that social media activities are not uniquely exempt from this fundamental business rule even if it’s a challenging and imperfect process in the social world. But that’s a whole other blog posting.

But, whether you believe the success metric is ROI, # of customers engaged or some other metric or combination of metrics, the key takeaway is that you should be measuring something. And direct marketers have been masters of the “test, measure, refine, repeat” process for years.

Like direct marketing, communication through social channels is easily manipulated to create multiple versions of messages and with the sophistication of measurement tools, it is very possible to measure the difference in impact between two tactics or two versions of the same tactic.

What’s different about social channels of course is that it is not nearly as easy or as efficient (at the moment) to create control groups to test true incrementality (this is of course one of those challenges to measuring ROI.) But we can get pretty good directional results when comparing lift in [insert metric here] pre/post tactic amongst two or more tactics.

Be relevant

Direct marketers don’t (or at least they shouldn’t) build distinct customer segments just for the sake of having them. They build them because segmentation allows them to increase the relevance of their communication and therefore drive a higher response rate and ROI.

Using social channels, brands can help customers self segment based on the content of the channel itself.

For example, Puma or Nike could have multiple twitter IDs or Facebook pages if they wanted to. And they could be dedicated to different sports. You could have a Nike Basketball Twitter ID which would probably attract different followers than a Nike Soccer ID.

Or, you might have a youtube channel that aggregates content about the soccer players that Puma endorses and one that concentrates on Puma fashion shows. Again, you would probably attract different subscribers to these two channels.

The point is, every brand has multiple segments within its audience and the more marketers can identify what segment you belong to, the more we can craft relevant messages that will increase response rates.

Be channel agnostic

Good direct marketers use a mix of channels. Credit card companies for example target customers with a mix of email, direct mail, outbound telemarketing and inbound marketing on service calls. Now, there are significant cost differences amongst these traditional direct channels so there is clear incentive to use email over say direct mail all else being equal.

But, direct marketers realize that for any given customer, all else is not equal and they make a conscious choice amongst the available channels to decide which to use to reach out to each individual customer based on the expected ROI (likelihood of a response balanced against the cost of the medium.)

A similar question of which channels to use amongst social media properties and marketers who take a channel agnostic approach to the space will find themselves delivering the right messages through the most appropriate channels.

So, if Nike finds (after measuring extensively, of course) that customers interested in basketball shoes respond better to messages in YouTube videos and that runners respond better to blog posts announced through twitter an agnostic approach enables them to match customers to the channel they’re most likely to respond too.

These are the first four lines to the final verse of So ambitious a track with a guest appearance by Pharell on Jay-Z’s most recent album The Blueprint III.

The song chronicles Jay-Z’s struggles to get a record deal and make the transition from drug dealer to artist early in his career. These four lines in particular speak to a couple things that are so important in entrepreneurship: Perseverance and drawing from what you know.

Had a couple of meetings no offers yet,

No. The word every entrepreneur is bound to hear over and over again as she pitches her idea to investors, customers, employees and even more demoralizing family and friends.

Maybe I aint good enough for these offices

Its no surprise that many would be start-up CEOs grow despondent when doors seem to be closing in every direction all around them. Often, the goal seems unattainable.

Back to the drawing board ducking officers

So, most would be entrepreneurs aren’t crack dealers, and they don’t literally have to hide from the police. but either way, often hearing no means going back to re-calibrate your business plan, talk to some more customers about what you should be doing and maybe even earning a salary for a while. But, that’s ok because…

It’s all good cos the streets is A&R’ing this

An A&R is a record label employee that funds and markets an artist. In Jay-Z’s metaphor, its his experience on the streets that fund his recording artist ambitions and provide the content for his rhymes that he speaks so passionately about. As an entrepreneur, your experience -again – probably doesn’t have anything to do with selling narcotics, but does provide the professional and personal background for your venture. And if that background is solid, rejection and having to go back to the drawing board is all good… you’ll get there eventually

So, what would Jay-Z do? he perservere, that’s what!

tion at somewhere between $1.5 and $3 BILLION.  My first reaction was that this was extremely aggressive. When I looked at the numbers a little bit clos

er though, I realized its not extremely aggressive, its actually somewhere between absolutely, ridiculously insane and catastrophically irresponsible.

Farmville and Mafia Wars are very popular games that make money by selling both advertising and virtual currency. I don’t know how many players are actually willing to lay down real money for the fake money that they sell but the fact that anyone is willing to do so is a testament to the fact that players are genuinely engaged in them.

But…to be valued at $3 BILLION? VC’s typically invest in companies they feel offer a 10x return. THIS WOULD IMPLY A FUTURE VALUATION OF $30 BILLION. staggering? YES

Lets put this in perspective by comparing Zynga’s valuation to a couple other companies in the space:

Electronic Arts – You know that little company that has long term licensing agreements with some minor brands like the NFL,

NBA, NHL, Major League Baseball, Warner Bros, Hasbro and others with revenues of $4 Billion per year, $2 Billion in cash on hand and $0 in debt is currently (as of 12/16/2009) valued at ~$5.4 Billion. Value to Revenue ratio of 1.35

Activision Blizzard – Another little company that has produced a few titles like Guitar Hero, Spider Man, Tony Hawk, Transformers and more with revenues of $4.4 Billion per year, EBITDA of $800 MM, $2.7 Billion in cash on hand and $0 in debt is currently (as of 12/16/2009) valued at ~$14 Billion. Value to Revenue ratio of 3.2

Now, of course Zynga’s financials won’t look anything like these two mature behemoths in the space today. But will they ever?

Lets just say that Zynga’s second most popular title Mafia Wars is actually neck and neck with Farmville in the number of users and that it has 65 MM users too. And lets say that Zynga manages to produce 8 more similar hits in the next five years. That would give them 10 titles with 65 MM users each.

Lets be aggressive and say that 10% of players are actually willing to buy virtual currency and lets be even more aggressive and say that there is no cannibilization amongst the titles.

Under these assumptions, you get 650 million players, 65 MM of them who purchase virtual currency from Zynga. Assuming a valuation of $1.5 Billion, to achieve Activision Blizzards’ more aggressive value/revenue ration of 3.2, Zynga would need to drive just over $70 per paying user to achieve a valuation of $15 Billion required for a 10x return. Assuming a more aggressive valuation of $3 Billion, to achieve Electronic Arts’ more aggressive value/revenue ration of 1.35, Zynga would need to drive just over $340 per paying user to achieve the $30 Billion valuation required for that same 10x return.

Expecting $70 to $340 per paying user? that sure seems insane to me!

After you consider how aggressive the assumptions I used are about the future success of Zynga’s titles as well as some even more aggressives assumptions about the willingness of their customers to fork over there hard earned cash for virtual goods and personally, I’d say it leans towards catastrophically irresponsible.

Now, Bebo is a social networking platform. A platform that allows users to organize themselves around relationships and easily create and share content with one another. So, essentially Aol – while transforming itself into a content play that makes money off of advertising doesn’t believe that the user generated content driven by a social networking platform is valuable enough to keep as part of that advertising business.

You know who else is a giant generator of user generated content?

Facebook.

Only Facebook claims that they will be able to drive better margins while producing better results for advertisers by delivering ads based on the context of the user generated content. A lot of smart people have invested a lot of money in Facebook betting that they’re right about that assumption.

I have my doubts as to whether social netowrkers will ever be in the frame of mind to consume advertising messages – no matter how relevant or compelling they are during their social netowrking sessions. Those ads seem very easy to ignore when I’m concentrating on writing on walls, updating my own status and seeing what my friends have been up to. On the other hand, plenty of brands have managed to develop campaigns that utilize Facebook’s social and community functionality to create highly engaging campaigns that yield real business results.

If enough brands develop these types of campaigns and are able to successfully support them with the paid advertising available on the site, maybe that could become a profitable model. We’ll see.

Ben Lee wrote a song about Jay-Z who he says he idolizes because he came from the amongst most unexpected places (A crack dealer who was born and raised in Brooklyn’s Marcy projects) and rose to become CEO of a record label. Not to mention, multi-platinum selling recording artist and founder and CEO of a successful fashion label.

If you’re not familiar with Jay-Z’s music, he revolutionized the hip-hop genre and I’m pretty sure he’s had more platinum record than any other artist in the category. He’s also a shrewd business man as evidenced by his success in that arena. His business acumen comes across in some of his lyrics. And that’s what this category of posts is going to be about. Fun, right?

So, here’s my first lesson from Jay-Z

“I’m not a businessman, I’m a business, man”

- Diamonds from Sierra Leone (Remix)

This should resonate with anyone who blogs about what they do for aliving. Blogging helps build your own personal brand and in an age where more and more highly skilled information workers choose to be freelancers and those that are full time employees manage there careers more like freelancers, thinking of yourself as less of a businessman and more of a business is important. That means:

• Managing your reputation online
• Thinking of your resume as a brochure
• Thinking of an interview as a sales pitch
• Thinking of the entire interview process as a CRM campaign
• Maintaining relationships with potential business partners (employers)
• Understanding and measuring the value you add to your partners

I’m sure there are more points that belong in this list so if anyone thinks i should add anything, please let me know

I can kind of see where what may have been the genesis of this idea: We charge people who talk on their phones more than those who talk less, right? shouldn’t the same apply for data? But, here’s why it’s different:

1. If you’re using a lot of data, you’re more than likely to own an expensive smart phone. If you own an expensive smart phone, the more likely that your NEXT phone purchase will be an expensive smart phone and the more likely that purchase is going to come sooner rather than later. As AT&T, you don’t want to lose the revenue from that future purchase.
2. If you’re using a lot of data, you’re more than likely already paying for an expensive data plan on top of an expensive voice plan. As AT&T, you don’t want to lose that rich, recurring revenue stream.
3. If you’re using a lot of data, you’re more than likely very engaged with social media and you just might be an influencer amongst your social group when it comes to technology adoption. As AT&T, you don’t want socially influential people telling their friends how much they got screwed by you and how they can’t wait to move on to a new carrier
4. If you’re using a lot of data, you’re more than likely the kind of customer that handset manufacturers love to try and attract. As AT&T, you don’t want handset manufacturers to bypass you with their latest and greatest handsets because you’ve turned off (or worse yet, outright lost) all of your technology early adopters / heavy users.

Notice that these things aren’t necesarily true of heavy voice users today. Also notice, that this decision may shift lucrative handset sales revenue to the competition, reduce retention rate for ongoing service revenue, create a set of influential detractors for the brand all of which may ultimately affect their supply relationships. Not good.

So, Mr De la Vega, I for one suggest you reconsider. And, while you’re at it… can you please reserve the best discounts and promotions for your existing customers who you want to keep instead of new ones who you’re courting?

We ask questions like: how can we make something go viral? or what can i do that will get people talking about a brand or a business? The reason we ask questions like this is that the investment in marketing channels has traditionally been managed the way one would evaluate an equity investment in a mature company.

An equity researcher conducts detailed research on a company and their markets and build pro-forma financial models based on historical financial data. Similarly with traditional tactics, marketers carefully research and model the future cash flows associated with funding a marketing tactic. While nothing is certain, there is enough history that allows a grocer for example to accurately predict the lift in sales they will drive by featuring a special on milk in their weekly flyer. Or, a premium perfume brand has a good idea of the impact that buying an inside cover ad in vogue will have on unaided awareness and how their sales funnel will convert that awareness into sales. As a result, marketers have been able to do a reasonably reliable job of choosing the right channels and tactics to build their brands and drive sales.

Social media marketing has two characteristics that makes investment decisions different to traditional media:

1. The virality that makes social media so compelling is difficult if not impossible to predict.
2. Success in social media means more than just driving immediate term sales. Along with immediate term sales, success means creating an asset in the form of a relationship that can be monetized over time.

So, if traditional marketing planning models itself off of investing in a mature stock (Relatively large, carefully planned and modelled investments) the two factors above suggest that maybe investment in social media campaigns should be evaluated more like a venture capital portfolio.

1. Venture capital and unpredictability

A venture capitalist looks at the potential for greatness in a company she is considering investing in and makes multiple investments with the philosophy that most will be dogs, a few may break even and one or two will pay off greatly. There’s no way of knowing which will be which at first – there are just too many factors involved. But, because the investments are relatively small, the one or two big hits pay off the investment in the entire portfolio.

This is true of social media as well. It’s impossible to know which campaigns will “go viral” but what we can know is which campaigns have the potential to be huge if they catch on. In social media, this potential is what we need to invest in. And since we don’t know which campaigns will be winners and which will be losers, we need to make multiple small bets knowing that many will not pay off.

2. Venture capital and long term asset development

A venture capitalist is less concerned with managing the quarterly or annual profitability of their investments. Instead, they focus on developing the most valuable assets they can over a relaitvely long horizon of 5+ years. The reason so many VCs want a piece of Twitter today is the potential value of the millions of twitter account holders. Not its quarterly cash flows from last year. Or next year for that matter. Same thing goes for Tesla who has built up a huge following as an early entrant into the luxury/performance electric vehicle market. Neither Twitter or Tesla has turned a significant profit and neither will in the short term. But they

I’m not saying that marketers should be willing to wait 5 years for a social media campaign to show it’s value. What I am saying though is that a big part of the value in a social campaign is the opportunity it affords marketers in the future through the development of an engaged audience that can be communicated with in the future. Either monetized through ongoing promotion or engaged with to derive insight into future product development and business model development.

So, between the need to make multiple, small investments and the focus on long term asset building being as important or more important as a measurement of success than short term revenue, its clear that the decision to fund a social campaign is very different to the decision of investing in traditional marketing.

By now, the new coke fountains that produce over 100 flavours of beverage have started rolling out to a number of quick serve restaurants so there’s a decent chance that you’ve seen and/or used one of them. They’re cool. No doubt, being able to order Sprite with a blast of cherry flavour made my sandwich taste even better. While the new machines carry some issues with them (I wonder how the restaurants feel about the increased turn time due to a queue at the self serve fountains since there’s only one spout and I also wonder how these machines can work in small spaces) but the insight delivered by these machines makes it a no-brainer for Coke to invest time and energy into figuring out how to solve the nagging issues.

That’s right. I said the insight delivered. You see, Coke is using these machines to collect consumer data directly from the field. The machine makes a database record everytime a drink is served that tells them which flavour the consumer has mixed. So, instead of having to ask consumers what new flavour of soft drink they would like to find in a 12 pack at their local supermarket, they can just go to the database and see what consumers actually choose in the marketplace. These machines, combine a great consumer experience and provide Coca-Cola with a 24/7 user testing lab that couldn’t be duplicated in anywhere near it’s scale or scope. Much more accurate than surveying people at the mall, right?

As it happens, even with an overwhelming number of choices, the most poured drink remains Classic Coca-Cola. Interestingly though, nearly every potential flavour combination gets poured at least once every day from high volume machines.

Don’t be surprised if Coca-Cola sbrings several new soft drink flavours to market that are strong performers straight out of the gate. Thanks to their investment in collecting meaningful consumer insight, They don’t need to guess what consumers like… They know.