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The 3 stages of a services marketplace

The Silicon Valley alter that is the whiteboard

1. The Hands On phase

Like every great episode of Silicon Valley, it all starts with a whiteboard. Customer (demand) and worker (supply) names are written on the board, with relevant skills and availability scribbled down. Everyone gets on the phones and calls each side, trying to make connections. Every connection is a new possibility, a new thread in the web you’re trying to spin. You’re losing money on every one, but if you’re doing it right they start to become sticky.

This means customers are not just delighted that you introduced them to someone that can solve a problem for them, but that it has the seeds of an ongoing relationship. They enjoy working with the person, they need that problem solved ongoing and (for your benefit at least) they see the value you add as the third wheel.

At worst they appreciate the comfort of having you on the phone to handhold them through the process, at best you are a critical part of the value chain that is hard to replicate without scale. Except you don’t yet have scale so this might cost you big time upfront – software, insurance, data, templates, logistics, call centre etc. Don’t resent the cost, because it’s also your barrier to competition. Watch that burn while you find market fit.

2. The Acquisition Marketing phase

Once the relationships are sticky and your churn is under control, you need to scale quickly to bring your unit cost down and start to pay off that upfront investment (or raise on a growth pitch to kick this can down the road). It’s time to look at the chicken and egg problem of liquidity. What services are not getting traction, and how might each translate into an efficient performance marketing campaign?

You probably have no brand equity, so your performance marketing needs to be very targeted and ideally not competing with established sector players. It’s also tricky to scale, because your segments could be very small and fast moving. 95% of marketplaces are demand constrained, so start by focusing on 1 side only.

Start testing campaign segmentation by customer type first until you get your CPA down to at least breakeven, before trying to solve for secondary variables like geography or availability. You’ll also need to start building a view on Lifetime Value (LTV) by each segment, so eventually you can think about bidding based on Return On Ad Spend (ROAS) or similar metrics. But every customer is different, and so this quickly also becomes a scale challenge that will require marketing data investments.

Don’t purely optimise on cost however, as the goal of this phase is to build number of connections not the number of users. Don’t underestimate power users who create a lot of connections even if they don’t spend a lot, you need to talk to and learn to love these people without becoming too dependant.

This phase is why 50% of startup investor’s money goes to Facebook and Google, you need to learn to love their tools and optimise (aka the sexier “growth hacking”) like crazy. But this needs to be just a phase – if you never graduate then you are at the mercy of the next algorithm change and/or well funded competitor. Don’t become the next GroupOn who spent like crazy here but never graduated.

3. The Product Growth Phase

Also called the Network Effect phase. This is the holy grail, where your product flywheel starts to spin and growth happens organically. There are 3 major things required here.

Finally and foremost – you need to understand what part of those calls in phase 1 relied on the human touch, and what was to overcome objective friction. Pour the gold of your customer service team over the trust issues, and scale the rest in-product with great UX that makes your funnel so intuitive as to be invisible.

Focus relentlessly on removing any friction in making a new connection; this could be through removing double commits, applying data and recommendation engines, teaching your users how their behaviour affects their success, systemically weeding out quality and fraud issues and many more concepts.

Finally you should clearly commit only to verticals where you can be number one. Your next key competitor will play in a narrower not a wider vertical than you, so you need to lead market share not just overall but more importantly in the key customer segments you care about. The network effect is a big moat, but it isn’t the winner takes all endgame it was first thought to be.

Admonsters Presentation on “The Future of Video”

AdMonsters logoOn the 22nd of March 2012 I attended the 2nd ever Admonsters Conference in Sydney, Australia. I presented on the Future of Television, and chose to focus on my personal perspective around the accelerating convergence of video advertising and content as it moves online. My inspiration sprouted from statistics and creative used in Robert Kyncl’s CES talk and some video engagement ideas from Kevin Allocca.

It was an honour to be able to present in front of colleagues in the same niche profession, especially in my home town which is a geographically obscure place to be doing such a role. My biggest mistake was underestimating their involvement with video advertising – I thought the number would be around 10%, but it turns out 80% of them work with video. It was exciting to see the local market maturity, but it was a little humbling to see all those hands raised at the end of an entry level video presentation. I did however thoroughly enjoy the presentation and I received a number of comments from others that really got something out of it. I really do feel that content marketing is a massive growing area, however I acknowledge that it’s a difficult area to strike a perfect balance in. If it was easy then YouTube would have no paid advertising and I wouldn’t have a job. 🙂

If you are interested in seeing the deck I presented, then please Download the Presentation Slides.

australian youtube logo doodle

Happy Australia Day!

Happy Australia Day 2011 to all the aussies who read my blog! Ernesto, 3DM and I worked hard to deliver the first YouTube custom logo for Australia ever and a custom video mapping gadget! The basic premise is that Australians can upload videos to YouTube and plot them on a map. This map then visually “fills in” to create essentially remap Australia in terms of summer memories. I am really looking forward to seeing how much momentum we can build off this one and it is great showcase for local creatives.

australian youtube logo doodle

Custom YouTube logo and youtube.com/MapMySummer gadget

Google also put up a custom doodle for today, which indirectly drives through to the YouTube channel too:

google doodle for australia day 2011

Google doodle for Australia Day 2011

Is it weird that I get a buzz from having input into the creation of these programs that re-craft some of the most recognised brands in the world? Must be my inner marketing geek showing through…

YouTube Symphony 2011 in Sydney

YouTube Symphony 2011 has launched, and the Sydney Opera House has been announced as the new final location! The program is revolving around an APAC advertiser and location, so it is an extremely exciting program for the region. Make sure you try the Augmented Reality application in the “Experiment” section.

This excitement is being driven internally by a surprisingly large and distributed number of Australians based all around the world. I was at the launch event at the Opera House on Wednesday morning, and every Google employee who spoke was Australian! It was quite an inspiring moment for an Australian in IT like myself looking to make an impact globally. Working on the project has already been an amazing experience, and things have only just begun.

I guess Symphony is already achieving its goal to be a globally inspiring program.

The Innovator’s Dilemma – Book Review

The Innovator’s Dilemma by Clayton M Christensen is one of the best business books I have ever read. It focuses on the practical aspects of innovation, with two key points (for me at least):

  1. You are most vulnerable when you are most profitable
  2. You need to create the start-up that undermines your most profitable products before someone else does
  3. New markets need simple, cheap products which hit a critical new requirement

This book is great inspiration for those seeking to become entrepreneurs, it shows practical examples of where start-ups have seized on opportunities and completely blind-sided the highly profitable incumbent. That’s the dream right? It also serves as a great warning to those in big business who feel chasing the margins instead of innovation is the path to success. It certainly puts forward a compelling argument, one that even NASA seems to think has merit.

Perhaps margins should be the guide for businesses, but they should work on a goal of an average margin across all their products instead. That way they can maintain a balance of high profitability mature businesses with low profitability emerging businesses. Of course this would need to be combined with some “profit margins must never decrease on a product” rule. Doing this without cannibalising your own offerings (by differentiating based on high end vs low end customers) however is a very fine line to tread.

The other practical reflection I had reading this book was on the Engineering vs Sales argument. Which side is better equipped to run a successful business? I am still yet to work anywhere that balances these two sides perfectly, it always seems to fall one way or the other. My thoughts after reading this book were that an emerging organisation needs to be run by the engineers (focus on product success, not profits or impossible projections) and mature businesses by sales people (focus on profits, finding upmarket customers).

What did you get out of this book?

Google Grants Post – Getting Started on YouTube

Wondering why I have been so quiet lately? I volunteered my time to write a blog post for the Google Grants blog instead!

http://googlegrants.blogspot.com/2010/08/get-your-non-profit-started-with.html

I really hope that it helps more non-profits get onto YouTube. It really is a great platform that will deliver a level of transparency and engagement with your supporters, and in turn it offers you call to action overlays to convert those supporters into contributors.

Best Mimicry Examples on YouTube

Cadbury Australia RollPack

Mimicry involves producing a custom gadget within a brand channel (home page is no longer allowed) on YouTube that mimics the YouTube interface and functionality. This requires a really close working relationship with the YouTube policy team and your Tech Producer. Here are the best examples of mimicry on YouTube that I wanted to highlight:

The most successful mimicry examples use an initial deception to draw the user in, but then they reveal that deception in a captivating way before the user starts to feel betrayed that they cannot interact with the standard YouTube controls (at least within the first 10 seconds).

Google Adwords Certified Individual

On the 30th of June I became Google Adwords Qualified in the category of Display Advertising. To achieve this I had to complete 2 120 multiple choice question tests with a pass mark of 85% or above. You can check my qualifications here:

Google Adwords Qualified – Display Advertising

Proves that Google dogfoods its own qualifications. 🙂

How can charities get started with YouTube?

Each year Google runs a GoogleServe week, where we each choose a non-profit project we would like to contribute to. I chose to present to a group of 30+ non-profit organisations here in Sydney on how they can benefit from our recently launched YouTube non-profit program. Despite being only a small contribution it was a very rewarding experience, and I was really impressed with how sophisticated many of the charities are.

I am posting my presentation here so that any other charities who didn’t attend can view it at any time. I am also posting a 1-sheeter handout that I gave to all attendees which summarises the simple steps to getting their non-profit onto YouTube. I hope they help!

Crossing the Chasm by Geoffery A. Moore – Book Review

I have just finished reading Crossing the Chasm (Revised Edition) by Geoffery A. Moore. I purchased this book on Amazon after seeing it on a number of Googler’s Amazon wish-lists on LinkedIn, which is a good way to prepare for an interview with a new company! Truthfully however I decided to read the book because I have a deep appreciation of marketing and a strong desire to be an entrepreneur.

The Whole Product concept instantly resonated with me. The only thing worse than an engineer that thinks “I built it, now I just have to wait for them to come” is a sales person who thinks “we need a custom version for every customer who promises millions”. The central theme to the book is that getting a product to be successful is like organising a battle; from amassing a strong force to landing on the beach and finally taking the flag. At each stage there is a huge pit of despair that you can easily fall into. The key to it is where you spend your effort. Don’t focus too much on satisfying every product need, but just enough to appeal to a mass market. Don’t focus too much on a sophisticated marketing message, customers will get confused by and forget anything that is longer than two sentences.

One of the key learnings for me was that you shouldn’t pitch your product as a one of a kind, because nothing freaks a pragmatic buyer out more than having nothing to compare you with. How can you make a decision without a reasonable comparison? First you need to establish a market alternative (a familiar problem you are solving in an innovative new way) and secondly you establish a product alternative (a familiar solution that you have uniquely tailored to this application). By drawing a line between these two points of reference, you have created a new niche that customers will understand and appreciate.

The only aspects of this book I didn’t like were some technology references were a little outdated (even the revised edition is now 11 years old). I understand the historical examples where there was a conclusion, but some predictions are a little off (although probably good “what went wrong?” case studies). I also felt the book was a little repetitive in places, with the author jumping ahead and back again.

Overall however it was a great book and really thought provoking. It is a hard topic from my perspective because how do you teach minimalism, balance and keeping things simple? It is easy to go off on a tangent and over-invest in the area that has your short attention span as an entrepreneur. I guess not seeing the forest for the trees is a simple analogy? Anyway, I will no doubt use this book as a source of re-focusing when I do eventually realise my entrepreneurial dreams.

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