The Online CMO by Philip Hallenborg

Entries categorized as ‘eBiz Organizations’

Everyone wants to be the ad network middle man…

September 14, 2009 · Leave a Comment

More and more often I come across companies that are trying to build ad network exchanges. They come from all parts of the world. Some of them are technology based but many are led by former ad network guys who are running with a new business idea.

Typically, these market entrants will address big publishers with the mother of all business propositions: “we will deliver constant money making peaks to your site”. Or even better: “we will optimize your eCPM at all times”.

In theory, the model is a good one and works in most free markets. The unique selling point is spelt liquidity. By plugging in the biggest advertisers in one exchange, publishers can benefit from a constant flow of ad placements to which they can deliver abundant traffic. The exchanges will typically address the biggest online advertisers and the biggest online ad networks to source traffic to their systems.

There are however two major problems that new entrants and exchanges face. Firstly, incumbent ad networks are in fact aspiring to be exchanges in most cases. The ad network business model i.e. making a percentage off transactions is identical to the exchange model where there is always an overall objective to optimize traffic and money making opportunities for publishers.

Secondly, incumbent ad networks are already the middle man and functioning as a market maker. By adding another middle man, incumbent networks become obsolete in so far as they lose their raison d’être and constitute one out of two layers between an advertiser and a publisher. That is one too many.

Bottom line is that most exchange entrants will find that incumbent adnetworks lock them out immediately out of fear of competition. Few exchanges will last without traffic and liquidity (publishers who bought in will quickly move on) more than a month. This is already happening every day.

As a result, we are seeing some aggressive exchange entrants acquire publishers that are not making money (typically old publishers that experience little growth and low profitability). The publishers’ traffic alone is worth little. But as a component in an exchange effort it is worth much more.

Question is – are ad network exchanges just ad networks with new technology?

Categories: eBiz Big Picture · eBiz Demand Generation · eBiz International · eBiz Management · eBiz News and Trends · eBiz Organizations
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CPM, CPC and CPA Arbitrage- An Emerging Online Opportunity

March 6, 2009 · 4 Comments

For most people, trading equals buying low and selling high. Typical traders will run there own stock or inventory and look for quick in and outs in any given market place.

In financial markets arbitrage is the practice of taking advantage of a price differential between two or more markets: striking a combination of matching deals that capitalize upon the imbalance, the profit being the difference between the market prices (Wikipedia definition). My appreciation of the term arbitrage also includes the notion of the capitalization being “risk free” i.e. the practice described above is done simultaneously such that no risk is incurred.

My colleague Jonas Rundgren brought my attention the other day to the emerging practice of “arbitrage” in the online advertising space. Impressions, clicks and actions are referred to as “currencies” and the arbitrage lies in capitalizing on the imbalance in conversion rates between cost per impression, cost per click and cost per action.

For example, if you know a historic conversion rate of impressions of financial services to clicks of financial services you can start trading when an imbalance occurs.

Let us assume that the market cost per thousand impressions (CPM) for relevant publishers/ site owners is 2€. Let’s say the standard historic conversion rate of financial services is 1%.  This would mean that a thousand impressions would give you 10 clicks. In a balanced market, the financial services cost per click (CPC) should be 100x the cost per thousand impressions (CPM) i.e. 200€. If this is not the case there is an arbitrage opportunity.

Publishers (site owners) will be more or less willing to settle for anything else than CPM deals. Let us assume they are indifferent. Opportunities in this case will arise from assymetric knowledge about conversion rates (historical data, publisher data, assessment of offering in question, seasonality). Assuming that the CPM and CPC prices are constant, a higher than average click through rate will allow market makers to buy CPM and sell CPC making a margin off the imbalance. A lower than expected conversion rate will allow market makers to sell in CPM and buy in CPC, again making a margin off the imbalance. A real opportunity, in real dollars, occuring every day.

Some maybe sceptical as to the real value in understanding this? But seeing that impressions, clicks and actions are the new currencies of the next century, with trillions of CPC, CPM and CPA transactions every day, there is a tremendous amount of money to be made in trading them. Only issue is that few players on the market have the adequate data to do it successfuly. And those that do hardly have the competency to understand how to manage risks and structure a trading outfit.

Categories: eBiz Globalization · eBiz International · eBiz Management · eBiz News and Trends · eBiz Organizations · eBiz Strategy
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Corporate Blogging: Common Sense.

December 16, 2008 · Leave a Comment

In an article titled “Time to rethink your Corporate blogging ideas”, Forrestor Research Analyst Josh Bernoff claims corporate blogs rank at the bottom of the trust scale with only 16% of on-line consumers who read them saying that they trust them. He provides some solid research (below) to support his point. Bernoff continues to say that consumers who say they trust these blogs are the most likely to trust all other sources of information.

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Bernoff does not suggest stopping corporate blogging but he maintains that you have to be “strategic about them” meaning “blogs that talk mostly about products often aren’t worth the effort”. Instead “blogs make sense if they demonstrate thought leadership; fit into a larger groundswell strategy with communities, videos, or the like; or allow PR groups to respond to groundswell threats” says Bernoff.

 

This is quite intuitive. I have previously written about how marketers shouldn’t be tempted to use Social media arenas for traditional advertising and self-interest broadcasting. I would say the same goes for corporate blogging. So in that sense there is nothing new to what Bernoff presents.

 

To me the real value of Bernoff’s data is actually that bloggers and blog readers tend to rely more on corporate blogs than the general population. This is rather a reflection of user maturity in using social media than anything else. And proof that as usage of blogs increase, a credibility gap will emerge between those corporates engaged in a dialogue and those not.

 

The purpose of corporate blogging should be to engage. Credibility doesn’t come from the engagement itself but from the depth of engagement (2-way), objectivity, coherence and integrity of the communication.

 

Similar to listening to someone next to you at a dinner party, you will be happy to find that they are talking to you 1 to 1 and not always to the whole group. Nevertheless, the credibility will come from a set of behavioral aspects and the contents of message. After all, we all know how interesting it is to set beside a self-centered individual who broadcasts a one way resumé of key accomplishments during a three hour dinner.

Categories: eBiz Management · eBiz Organizations · eBiz Social Networking · eBiz Strategy
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Support tool needed!

April 14, 2008 · Leave a Comment

Having seen a big e-commerce organization from the inside it strikes me that there is no uniform software or support tool for having merchandising (publishing), brand (portfolio and product updates) and execution (database functionality, pricing engines and execution) work together. A typical e-commerce system will support updates of merchandising (HTML code) and change of price. As this is updated in the database, publishing will automatically follow.

 

Nevertheless, the key here is a tool that supports a process before go live. What steps need to be finalized? Where is the publishing work stuck? How fast do we execute the chain of events and where does the bottle neck sit?

 

I anticipate more and more organizations asking for something like this in a near future as complexities with increasing widgets, functionalities, formats, products and pricing set special requirements on robust processes.

Categories: eBiz Big Picture · eBiz Management · eBiz Organizations · eBiz Strategy
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The Online Dream Team – Core Org Competencies

April 2, 2008 · Leave a Comment

Over the years I have seen several set ups of online execution teams. Here are the most important functions needed, and the roles and descriptions for each role, to successfully own, analyze, develop and control an online business. It is a seven man team that, with a reasonable level of support functions inhouse and outsourced (IT, Support, Customer Care) should do the job:

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Online Sales & Marketing Director

• Team leadership and development.
• Setting strategic direction for the business (growth, market share, segment etc) and managing budget.
• Overall owner of web key performance indicators (visits, convergence, revenue/ visit etc).
• Driving portfolio profitability, mix and pricing efforts.

Product & Pricing Manager

• Optimize product offering (selection of products and accessories).
• Drive correct margin ladders and promo activities.
• Optimize margin$ – price elasticity (and cross elasticity).
• Create and monitor price point development and portfolio aggression.

IT and Reporting Analyst

• Set up comprehensive reporting on key metrics (productivity, financial, quality and timeliness).
• Perform ad hoc analyses for team e.g. set up multi variate tests.
• Head up knowledge management (manage library of learnings and “playbook”).
• Liaise with IT organization and ecommerce vendors to secure necessary functionality/ road map.

Online Market Communication Manager

• Drive Natural Search and own Search Engine Optimization
• Optimize Internal Search.
• Owner of affiliate programmes and campaigns
• Owner of email marketing, database mining and renewal programmes.
• Owner of blogs, RSS, PR and user generated content.

Usability and Merchandizing Manager

• Optimize onsite pathing and all options (learn mores, avatars etc).
• Optimize landing pages, banner formats, affiliate offer, creatives etc.
• Optimize upsell, cross – sell options.
• Manage and improve customer experience metrics.

Margin Leakage Manager

• Own support, Q&A Continuously improve customer processes.
• Optimize check out and payment options.
• Follow up on all levels of leakage – especially late stage.
• Follow up on all cancelled orders and run out bonding activities.

Copy writer (copy and pictures)

• Own and develop the site look and feel together with Usability and Merchandizing.
• Write proprietary descriptions of products and site assets – tailor language to customers (i.e. don’t automatically upload product descriptions).
• Maximize and test effective copy, headers, fonts etc with merchandizing manager.

Categories: eBiz Big Picture · eBiz International · eBiz Management · eBiz Organizations
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Coffee Machine Chats Govern Globalized eBusinesses

March 10, 2008 · Leave a Comment

When I was 15, I used to work extra during the summer at UPS Stockholm (when it was called Seabourne). My father was the managing director for the company so I wasn’t exactly employed for my skill but more as a typical “gotta find my son a summer job” employee.

One of the things I used to do was to send telex to other offices around the world. Yes, you heard me. Not fascimile/fax but telex (see the beautiful beast below). I realize that I must sound like a relic from the past. But we actually used to send confirmations on transports and messages on financial daily performance via telex. This was in 1988 and I recall this even at the time being inferior to fax and a tool that was looked upon with some scepticism.

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Today, I find myself in a purely globalized company using an array of communication tools. To name a few I use fax, email, internet messanger (only internal), MS net meeting, MS live meeting, smart phone, Avaya IP Phone software (mobile office), telephone and video conferencing. In the online space we are especially open to new tools given the magnitude of our business outsourced to India and other offshore locations.

Because I tend to IM with colleagues only 5 metres away, the only way to notice that your colleague is on the other side of the world is that you don’t know which part of his name is first and surname respectively or that you ping him in the evening and he says “good morning”.

At least it would appear so. 

I am becoming painfully aware of the downsides of the globalized company. In theory, all the communication methods offer a steady flow of information. But the problem is that information, when offered by face to face substitutes, doesn’t help you understand culture, attitude or informal agendas.

An abundance of factual information derived from the rich palett of communication methods may give you a false sense of being “in the loop” when actual decisions are made by the Coffee Machine in influential corporate locations.

So if you want to be effective in a globalized world, move your desk to the coffee machine and depend less on your email. Direct interaction face to face still rules unless you work in Finland. There you need to remove your clothes and move your desk into the sauna…

Categories: eBiz Globalization · eBiz International · eBiz Organizations
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The Relevant Competency Theory

March 4, 2008 · Leave a Comment

Have you ever wondered why there are so many people in organizations that hold jobs that are out of their league? Some people would point to politics but I have an alternative explanation. I call it “The Relevant Competency Theory”.  

Three levels of competency

There are three core levels of competency that you will find in most organizations. I like to organize them in a pyramid similar to Maslow’s hierarchy of needs. They are independent competencies, but in order to reach the top level, contextual competency, you need to first have the below levels.

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Relevant Cognitive Competency

This is the basic and first level of competency. There are two parts here. First and most important is experience and knowledge of the specific organization and industry in which you act. It cannot be stressed enough how important it is to talk the talk and to understand acronyms, organization culture, industry specific terms and formal and informal decision makers in your organization. Secondly, general business and financial acumen, as well as social skills, would come in here. So would previous experience in a similar business or function.

Analytical Competency

This competency obviously has cognitive elements. This competency is in essence intellectual horsepower and raw intelligence. The analytical competency is a scarce resource in many organizations as it cannot be easily acquired. It is normally distributed in most organizations meaning few in the top decile.

Contextual Competency

This level of competency is the rarest competency in any organization. It requires a high level of cognitive and analytical competency. This is where you will find the smartest and most experienced people. They see patterns that only years of experience and a highly developed analytical competency will reveal.

Implications for the corporate ladder

So the question was – why are seemingly incompetent people placed in competent roles?

On all levels of an organization the answer can be found using this theory. The winners are the people that have developed their Relevant Cognitive Competency. They know the org, the decision makers and metrics and they talk the talk. They have often served many years and seen a number of roles by which they can become key influencers. And because of lengthy tenure they are often in the right place at the right time.

The problem with many of the Relevant Cognitivists is that they often lack developed analytical competencies. This in turn makes them over attribute the importance of their own competencies. Who hasn’t heard managers say “you haven’t done X, you haven’t Y, so you can’t do Z” etc etc.   

People that only boast analytical competencies e.g. those having worked as a consultant for several years before entering an organization, will find themselves in a more difficult position. Firstly, these people are often highly competitive and have been born and bred on comparing performance and formal merits. When faced with the reality of relevant cognitive competencies they will often feel confused and ultimately demotivated in what is perceived as a nepotestic and unfair system.

Secondly, there is a catch 22 in acquiring Relevant Cognitive Competency from the Analytical Competency perspective; you often need to start in very unqualified roles which normally wouldn’t be attractive for people with well developed analytical ability.

In most organizations you will find many strong Relevant Cognitivists that have leading middle and senior management roles. However, the analytical competency, including its typical artifacts such as academic brand names and typcial highpo career paths, will develop to be a de facto glass ceiling for Relevant Cognitivists.

The analysts on the other hand will need to acquire tenure and enough relevant cognitive competencies to get onto the promotion and accelerated short lists.

For those who manage to combine both awaits the final contextual competency level. You know that someone has a contextual competency when they find patterns that others don’t. They excel on the strategic level and can easily prioritize in the noisy information flow.

So if you want success in organization there is one trick that will never fail. Stay in the same company for a long period of time. If you happen to be gifted with the analytical competencies chances are you have a bright future.

Categories: eBiz Big Picture · eBiz Management · eBiz Organizations
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Processes – The Organizational RAM (Memory)

February 27, 2008 · Leave a Comment

Processes. The word carries many associations. For me these associations used to be negative. I used to think of bureaucracy, engineering, boxes, factory and complex charts. Today, I know that processes are the memory of any organization. I think most people value their memory highly and most of us dread the thought of losing it.

Process Chart

To me business processes, if developed and maintained adequately, are the sum of the cumulative learnings of any organization. Among humans we call this memory, experience and cognitive ability.

Companies with leading end to end processes can endure high attrition, churn in product offering and even challenging competitive moves without losing their position in the market. Although processes imply rigor and inflexibility I would argue the reverse. If you don’t know your base line, how do you map where you want to go? How do you focus on the incremental change if everything is incremental?

Look around you and ask a painful question. What happens if all your staff died in a plane crash. Would anyone else be able to recreate your successful business practices? Or are your business practices safely tucked away in the heads of your brilliant people?

Categories: eBiz Big Picture · eBiz Management · eBiz Organizations · eBiz Processes
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Use Growth Sequentials to Balance Your Margin Aggression

February 25, 2008 · Leave a Comment

Many of us Business Managers find ourselves managing our business relative to a forecast. This involves some clear benefits including simplicity, ease of communication and at least a perception that you always can bridge out the GAPs to plan and go fix.

However, we all know what a typical forecasting process looks like. Not always the most scientific and often a compromise of inputs from different teams.  Much of effort is spent on extrapolating trajectories based on historical seasonality and sequentials. I find myself looking at forecasts that include both gross revenue and margin targets.

The normal approach to calculating margin is to look at an estimated price level (could be an average revenue per user or total revenue per unit) and apply costs based on an estimated product mix given the strategic goals for the portfolio. More often than not, you find in the beginning of the quarter you are not on your target (either above or below). And very often your plan is based on your historical sequential growth than what is actually expected to happen in the market.

My key message is this: if you are not growing with the market you have no raison d’être.  If you haven’t managed to secure the right cost structure then focus on fixing that instead of pretending that you can grow profitably with the market. Don’t screw up your market position!

Market share is key. Take a margin$ bath in the quarter while you give your purchasing/ product unit hell (or perhaps your managing director…). Otherwise you will end up in the negative spiral of opex descaling with decent margin% but no margin$ to show for. I have seen it happen.

Essentially what I am saying is to look at your weekly QoQ growth sequentials and compare these to the leading forecasting estimates of market growth for the quarter. You may have to do some seasonality and mix adjusting (a few products will contribute most of the growth) but in essence make sure that the sweet spot products that are driving growth in the market are headed out of the ball park in your dash board.

Don’t try to focus too much on the margin – unless you are way off.  Set the equilibrium margin % where you are at least sticking to market growth. And do not listen to the dash board bureaucrats. They will be delighted to lose 50% of market share as long as they hit plan :)

Categories: eBiz Management · eBiz Organizations · eBiz Promo & Pricing · eBiz Strategy
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