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Ellen is Multi-Screen

Ellen Degeneras hosted the 2014 Oscars last night and was clearly sponsored by Samsung during the show.

Screen Shot 2014-03-03 at 12.37.41 PM

To her credit, she managed to take down Twitter with her group selfie picture.

Think about that for a moment. She took down one of the largest internet services in the world.

This clearly showcases how fragile our internet infrastructure is and it also showcases that the masses are ready for a multi-screen experience. Ellen took advantage of a live medium with a very broad audience and showcased that not only are people willing to participate, brands are also willing to jump on the bandwagon. Being part of the largest re-tweet to date, Ellen managed to get major brands, like AARP to participate for free.

If Twitter wasn’t having such an issue with the bandwidth, I am sure her true impact would have been much larger. At the time this article was written the photo had been retweeted nearly 2.8 million times.

This one interaction marked several changes in the market which all brands should take note of.

  • People obviously have another device right next to them while watching TV.
  • People want to feel like they are participating in a live show, not just watching it.
  • Motivation and coolness are fleeting. EG – the incentive to re-tweet the photo today is almost non-existent.
  • People will do virtually anything if they are told by people they trust.

As a marketer, there are tons of opportunities that these four realizations can lead to. No matter what your content or message is, timing it correctly and anchoring it to a voice that people trust is paramount. Otherwise, you are just shouting into the abyss where no one can hear you.

Ellen may be the harbinger of truly interactive multi-screen content. Being that it took a large scale live event to bring this concept to the forefront, it may indeed signal that multi-screen is more suited for live events rather than pre-recorded content.

If I had to guess, I would say that this “challenge” of creating the most re-tweeted photo is met with other challenges from other shows and celebrities. While this novelty is quickly burning out, the mavens of this experience will be working on new games, commerce experiences, charity events, and other types of content distribution.

Thanks Ellen for realizing that technology and marketing can seamlessly integrate.


Netflix Digital Bulimia

Netflix released all 12 episodes of the House of Cards season 2 on February 14, 2014. By the evening of February 14th, there were several reviews online of the entire season. These reviews included spoilers and a bit of reflection by each writer on the experience of watching nearly 12 hours of content in one sitting.

Netflix has come up with many innovative ways of delivering content and has in some ways supported the concept of binge consumption. For the blog writers, the need to binge on the content is in order to be the first to post a review of the content.

However, for regular viewers, it can be argued that binge consumption is not healthy socially, physically nor mentally. Binge eating is largely considered a disorder. For people who suffer from the eating disorder, they tend to hide it, they do it alone, and there is little incentive to share their binging experiences with others. It stresses the body and can ultimately lead to death if not treated properly.

Media content binging is not all that different. People who binge watch all 12 episodes, will largely have trouble finding a large enough group to discuss the storyline with. This is a really hard show to discuss by the water cooler since you have no idea what episode the other person has seen.  Being able to watch all 12 episodes at once also signals that the viewer may not have a real social life or other responsibilities. This again is somewhat embarrassing in social settings. Lastly, sitting around for 12 hours watching a computer or TV is not physically healthy.

Netflix spends months making all 12 episodes only for a viewer to race through the content. Feeding the disorder, they want more and more, and feel less and less satisfied with each piece of new content. Netflix has written an excellent story line with House of Cards, each episode beckons you to watch the next episode. Ultimately, you are left at the end of the season on a cliff hanger, with no way of getting a new fix. You have to wait until the next season is produced, which could be months.

This inherently, is Netflix’s biggest problem. The time it takes to make high quality content versus the rate at which we can consume it.  To offset this, Netflix really needs to have multiple shows in production at all times. They will need to stagger the release of each show to help keep everyone hooked on their content. Essentially, they don’t need you to be loyal to one show, they need you to be loyal to their system or network.  Think of this as demand fillers. Perhaps this comes in the form of new shows, back stories on the main show, or other new forms of content. Either way it has to be highly engaging, garner social media attention and be easy to create.

This is a monumental shift in media content creation and delivery. Netflix will have to ride a very fine line between content production costs and overall subscriber revenue. To keep everyone satisfied they will have to have a much larger library of original content. Combine this with the overall bandwidth costs of delivering high quality video, Netflix is facing a major uphill battle in the coming months.

As an investor, one must ask themselves, can Netflix sustain these costs? If they can, will the viewers be loyal in between seasons of shows? Can Netflix create secondary content around each show to fill the demand from the viewers to keep their loyalty? Can Netflix come up with enough new shows to keep viewers loyal all year round? Is Netflix’s value built upon a constant life time value throughout the year or a fragmented life time value of people paying only when new shows are available?

All of these questions will be answered in due time, but until then, take note of how your friends and family discuss or more likely don’t discuss their binge habits.

The most important play of the Superbowl

How did everyone miss the most important portion of the Superbowl?

Easy, the NFL only dropped a short hint about the new NFL NOW service. With all the other ads and the boring game, it was easy to miss. But do take notice, this is about to revolutionize sports and advertising.

What is NFL NOW?

NFL NOW is essentially the foundation for a truly omni-device content delivery network from the NFL. In the initial launch it will offer only clips of videos but it is easy to see where the NFL wants to take this. They want to go direct to the consumer.  This mirrors what the WWE Network is doing but does not have the clear cut billing model nor the full length content the WWE is promising.

The current marketing around the NFL NOW network is really focused on getting the avid fan highlights about their team and their fantasy players. Personally, I think the real long term value of this is being able to see out of market games on any device. Combine this with the ability to do AirPlay or ChromeCast and you suddenly don’t need the bundled cable offerings.

It also adds a whole new layer of entertainment for in-stadium viewing. Imagine being at a Seahawks stadium and watching highlights from any other team in the league.

The additional analytics and additional engagement models are enormous. The ability to cross sell other event tickets, and deliver ultra-personalized advertising really makes this network launch a massive cash machine.

This also has the potential to open up a whole new audience outside the US. However, my guess is that the NFL will keep this a US only product for the near future.

So what could go wrong? 

Given the size of the NFL, there are plenty of existing legal contracts that either have to expire or be reworked to allow for full length content to be delivered in real time. Lawyers know how much money is behind the NFL and the Cable companies, so it makes sense to draw this out as long as possible.

The other thing that could go wrong is that the NFL doesn’t make bite size content well or doesn’t leverage the true power of the mobile operating systems. For instance, if you are repurposing TV spots, the overall length maybe too long and it may not be considered exciting enough for modern consumers. Combine that with 30 second ad spots and you have a poor consumer experience.

However, if you add the ability to do slo-mo scrubbing on the phone or create instant memes, the content amplification could be huge.

NFL Now is certainly a product to keep an eye on in 2014. Seeing a major brand like the NFL go in this direction is a clear indication that 2014 is about delivering content in a whole new way.


Apple the cool kid with no real friends

Apple is always making the news, keeping them cool in the eyes of the media. If you look at most tech blogs the articles around Apple are usually the most heavily commented on and linked to. In other words Apple is good for the media industry.

In the past week or so news leaked that iOS6 would not be including the YouTube app by default. This doesn’t mean you can’t get the app on iOS, it just wont be on the home screen like you are used to.  Is this big news? Not really, it is just Apple putting a line in the sand against Google and it’s Android operating system.

When I saw this news, I started to think, Apple is really good at making hardware and operating systems. However, they come up really short in content generation and social networking. Google is still the most dominant player in search, online video still has the most widely used maps, and is making strides in the social networking space. Facebook clearly dominates the social network space and is making inroads in to the advertising space.

Apple a few years ago buddied up with who they thought was the coolest kid around, Google. Apple these days is dumping Google in favor for Facebook and Twitter offering OS level integration of the two platforms.

I think to some extent these partnerships are keeping Apple a pure hardware and OS play. If they bet on the wrong partnership in the future this could be disaterous for them long term. If they bought a network like Path, which is tiny in comparison to Facebook, could they push it to greatness or would they mess it up and lose market share? Would any of their acquisitions actually cause them to lose partnerships?

I think getting into bed with Facebook and booting out Google is a short cited move in some ways. As a user, I would love the ability to have both Facebook and Google features by default on my iPhone. I don’t want to be tied to one network if possible, and it would be nice if the social integrations were selectable by the user and not just some corporate lawyers.  In my opinion Apple can gain more consumer market share by allowing more than one network to integrate at the OS level.

Otherwise, Apple will continually go through a cycle of being the coolest kid with the best hardware, but it will also be known as the kid who dumps his real friends whenever something new comes by.

Google+ Hangouts on Air and EDU

Google just announced that Google+ Hangouts on Air will be available to everyone worldwide.

What is a Google+ Hangout?

Google+ is a Google’s social network which is more based on friend discovery which is different than Facebook’s model of being a voyeur on your friend’s lives. Google+ hangouts allow you to have an online video chat with multiple people at once. Think of it like a giant video conference call.  Quick promo video is here.

The cool thing is that this is 100% free, and you can join anyone’s public hangout. This means you can really strike up a conversation with people you don’t know and potentially learn new things.

Google+ Hangouts on Air is a way for people to publicly broadcast their hangout and save the video recording on their YouTube channel for a later viewing. Some examples of this are here:

Trey Ratcliffe in a Google+ Hangout.

Here is a quick explanation of how to get your Google+ Hangout started:

Why is this important for Education Marketing?

Marketing in general is about questions and answers. (OBVIOUS STATEMENT). Does your product or service help me do X?

Education marketing is largely form based and a one to one approach. I fill out a form, get on the phone with you, ask a bunch of questions and the school tries to sell me on a course.

Leads are incredibly inefficient in some regards. They ask a person to wait for an answer, sometimes the leads are never called back since they don’t meet certain criteria, and you are in a sales pitch most of the time, not a true consultative approach. Another downside for leads is that they require one call center rep to be talking to one person at a time. Lastly, I would bet that most prospective students don’t have a pen and paper to write down their questions and the respective answers. The majority of the knowledge on the call is lost within seconds of hanging up, resulting in more calls or a lost sale.

Being in a recorded communal chat with video has several advantages.

  • The video is recorded – people can review the video again later if they get interrupted. Being interrupted is almost 100% certain given the volume of communications methods we have these days.
  • The questions come from multiple people. One person may ask a question you never thought of. This benefits everyone in the group.
  • Cost delivery is much lower. One trained person can talk to several people at once.
  • Since it is online, you can continue the conversation after the video. It is easy to take the conversation private or continue via phone.
  • It feels more personal since you can see the other person’s face.  This builds major trust with students that are worried about “fake online schools.”
  • The video itself can be used a marketing material. Real conversations are a great way to show your company has a soul and see that the other prospective students have the same worries as you. Knowing you are not alone is a major psychological element.
  • If a person can successfully communicate via a video chat, they should have no problem learning online. Consider this a quick and free test to assess their technical skill level.
  • You can easily assess their grammar level and communication skills.
  • You don’t have to worry about transparency issues. Everything is recorded.
  • No school is doing this now. The first movers here will establish a major market advantage and potentially drive real sign ups versus useless “likes” on Facebook.

What about B2B marketing?

From a B2C perspective, there are many advantages for using Google+ Hangouts on Air for marketing. However, I think there are also major benefits for using this method for B2B marketing of Education technology.

Imagine being able to host webinars about your technology for a variety of market leaders at once? At first you might think this is a bit odd since your competitors might be on the call.  That may be true in some settings but in other settings you might actually receive valuable insight from the other people in the Hangout.

Instead of traveling to expensive conferences, sometimes it is better to get 5-10 thought leaders into a common place and hash out a guideline, talk about a white paper, or talk about some pertinent news. Or perhaps after a conference, the panel wants to clarify a few points, they can easily hold a hangout to further discuss. The conversations should continue after the convention.

Anyway you look at it, Google+ Hangouts on Air has the potential to really enable a lot of new ways of communicating for the B2B world.

Another potential use for this technology is a shareholder conference. I can easily see quarterly shareholder calls going from boring phone calls to interactive video chats so that shareholders from around the world can question management.



Marketing Education to the Military

For Profit schools have been receiving a ton of heat since 2010 since the Department of Education started investigating marketing overly aggressive marketing practices.

More recently for-profit schools have been under attack for aggressive marketing practices towards the military audience.

Three Democratic senators, from Hawaii, Alaska and Washington introduce the GI Bill Watchdog bill which is formally called the GI Bill Consumer Awareness Act of 2012 or S.2241. The full text of the act can be found here.

The core mission of the act is to make sure current military members and veterans have more transparent information when choosing a school.

On Senator Akaka’s website he highlights the following:

  • Information Availability:  The GI Bill Consumer Awareness Act calls for disclosure of, among other data, statistics related to student loan debt, transferability of credits earned, veteran enrollment, program preparation for licensing and certification, and job placement rates.
  • Information Dissemination:  The GI Bill Consumer Awareness Act requires VA to provide educational beneficiaries with easy-to-understand information about schools that are approved for GI Bill benefit use.
  • Staffing and Training:  The GI Bill Consumer Awareness Act requires educational institutions to have at least one employee who is knowledgeable about benefits available to servicemembers and veterans.  This legislation further requires that academic advising, tutoring, career and placement counseling services, and referrals to Vet Centers are available and that institutions offer training to faculty members on matters that are relevant to servicemembers and veterans.
  • Curbing Misleading Marketing and Aggressive Recruiting:  The GI Bill Consumer Awareness Act requires VA and the Department of Defense to develop a joint policy on aggressive recruiting and misleading marketing aimed at servicemembers, veterans, and other beneficiaries.
  • Educational Counseling: The GI Bill Consumer Awareness Act makes educational counseling available to more beneficiaries.

What should I do if I am an online school?

There are a few quick things you can do to help your military students.

  • First, focus on providing a quality experience – everything boils down to the quality of the education and true understanding of the military audience. Making sure you have dedicated veterans on the phones talking to prospective students is critical. No civilian will ever truly understand what a military member has been through
  • Don’t bombard them with emails and calls. Respecting the military member and giving them a reason to call you back is the best way to get a qualified student in.
  • Make a dedicated section on your website for military members that provides tuition info, debt, other current military students etc. Using graphics to show that you are SOC listed, Yellow Ribbon certified or listed on the WEAMS database are also helpful to military students.
  • Stick to the basic education marketing council guidelines. The info is valid for the military audience also.



Startups are Destroying the US Economy

In the past few weeks, I have been lucky enough to visit a variety of conferences regarding entrepreneurship.

One of the most recent events was sponsored by Bain Capital and the Accelerator at the University of Texas at Austin. It had three engaging speakers, a professor from Rice University who had done well in business, a CEO who had sold a company for over a billion dollars, and an entrepreneur who sold a small personal item belt.

During the course of the discussion I think most people discounted the entrepreneur who sold the belt, since it was low tech, it was a physical product and she had not taken money to develop her business. Kim Overton’s company SPI Belt is 100% bootstrapped.

People started paying attention her once she said that she was making close to $8 million dollars on these tiny low tech belts. And the kicker was that she didn’t have to answer to anyone and she still had 100% ownership. By most definitions she runs a successful small business.

Why I bring this is up is because it hints at an issue with American culture. In 2012, millions of entrepreneurs have taken the route of creating a startup instead of creating a small business.

The laymen distinction between a Startup and a Small Business is that a small business is an industry that already has a definitive revenue model. A startup just has an idea with no current revenue model.

From a macro-economic perspective, my personal take on this is that early stage investors are actually destroying value by taking a strip mining approach to entrepreneurialism. In a traditional strip mine, thousands of tons of earth are moved to find ultra valuable minerals in tiny concentrations. This is not sustainable since it disrupts the larger eco-system which doesn’t repair itself quick enough.

In current day startup investing billions are spent to find the next Facebook or Twitter.  On top of the engineering costs millions more are spent on PR to create buzz. In reality they are trying to be market makers to define the value of a particular technology.  Most of the PR is professing why you should be using X technology to share, communicate, be involved, engaged etc.

Daily, companies are funded that have no revenue model and intentionally shun traditional monetization programs like advertising.

Now, what are the effects of this approach?

  • Thousands of well educated individuals go into jobs being mainly compensated via investment capital or even worse shares of equity. This usually equates to a shoe string budget for the person and it greatly limits disposable income. From a macro-perspective I am sure that thousands of entrepreneurs choose not to buy a home or durable goods since they are not sure if their income stream is going to be consistent. This undermines economic value creation.
  • From a time perspective, if a young person spends 2-3 years in various start ups that all ultimately fail, this is time that could have been spent working in a traditional business driving real sales, and potentially more tax revenue.
  • They are repeating failure. They are encouraged to continue to take risks and continue to waste time and money. There are few instances within the Silicon Valley culture where people say “hey, I think you failed enough, I think it is time for a regular job.”  Silicon Valley has created a culture which is a kin  watching a gambling addict. They will double down on every hand even if they know they are going to lose.
  • Startups are fairly elitist. They look for people with pre-existing skills or a higher education in many cases. Startups don’t usually create jobs for under-educated people and don’t really have the resources to train people. Once again preventing larger economic growth for people who don’t have access to higher education.
  • Startups are clustered. The investment and startup community is rather incestuous. If you really want money for a startup the most common advice you will get is to move to Silicon Valley. This creates a brain drain in communities which need it the most and relegates them to stagnation. Imagine what would happen if those sample people stayed in their community, grew a small business and infused their enthusiasm to a more traditional business. Perhaps their community would start to see growth again and retain talent long term.
  • Start up culture has rebranded the concept of panhandling or begging. Asking for money in exchange for an idea/vapor is the exact same thing as begging. If you have no intent to ever monetize your idea but create really cool technology, your concept or start up is undermining fundamental business rules.

By now, most of your are thinking, this article is really offensive and doesn’t cover every start up. And you are right. I apologize for that. But keep reading it gets better.

Should early stage investors stop gambling on new ideas? No.

So what should change?

There are a few things that need to change to create more talent in America that generates real revenue.

  • An investor should embed startups with the concept that having a revenue model from day 1 is not only good but also necessary for funding. No exceptions.
  • Startups should understand that the ultimate goal is to get information about users and get more eyeballs. What that statement means is that ultimately we need to sell advertising/products to your user base. If you don’t feel comfortable with the concept of selling, you shouldn’t be starting something up. The other perspective on this is that your start up should reduce costs. EG – making transmission of data, faster, cheaper, easier. That is value people will pay for.
  • Larger companies need to restructure research in house. Millenials fear large companies since they appear to be boring, slow and lack innovation. Internal skunk works will create macro-economic value through salaries/taxes and potentially create new revenue streams for the company. Plus you get to train the person to work in a much more diverse set of individuals.   The idea of an internal skunk works department also helps keep knowledge in a system where it can deliver value now or later. If a start up dies, most of the knowledge dies with it. There are lot of start ups which come up with the same idea but with minor variations. If the core idea is corrupted or not able to make money, we are now wasting resources two times over. There really should be a site of concepts that never worked. F**Kedcompany used to be that resource.  I suspect that this site will come back very soon. The IBMs, HPs and Ma Bells of the world were some of the best incubators of all time. The US military is also one of the best investors on the planet. Why aren’t more startups aiming at being inside HP or selling to the US military?
  • The concept of early stage investing should always include mandatory focus groups and professional managers with a record of selling a product or service to customers. Focus groups of real customers keep your product realistic. Only work on ideas that people actually want and understand. Technology should work for us, we shouldn’t have to learn it.   Having a person on the team that knows how to make money will force you to compromise. This is a short term compromise. Once your company is large enough you can start experimenting more with “cool” features.
  • Investors need to get back to fundamentals of revenue and costs. Coming up with bullshit metrics to justify the company’s growth curve is selling snake oil. Time on site, number of page views, engagement, social velocity are useless terms unless your site has a true way of making money from all of those people.
  • Instill common values about not wasting resources, be it money, brain power, or time.  If you are interested in seeing how spending limited resources might actually cause  a collapse check out this MIT Study.
To really see any of this work, the unfortunate fact is that we need to re-align values. The only quick way that happens is through a major catastrophe or market crash.
For more information on how Silicon Valley was created I suggest reading the NPR series here. 
My advice for today is get off your computer/phone/tablet for a moment and look outside at a local business. Imagine how long he could give away his product for without you paying for it…The Internet is reality, it must make money eventually.
What I would like to augment in this article:
If there is a university researcher out there that wants to help me gather data on how much startups take from the economy and how much they actually produce, please email me! The only true way to verify the thoughts above is through hard statistics and defining if a dollar invested in a failed company actually creates any value, or if it is a 100% loss.
I welcome your thoughts/comments!


How Mobile Growth will Fuel Advertising for Years

The Business Insider put together a great presentation about where we were in terms of mobile growth world wide and smart phone penetration globally.

It had some amazing insights which are summarized here, but I also wanted to provide a perspective on how this may affect online advertising.

  • Currently 835 million smartphone users vs 5.6 billion feature phone users. (Keep in mind the number of phones is almost the same as the number of people in the world!)
  • Smartphone sales exceeded PC sales.
  • About 46% of US mobile users have a smart phone now.  So we are only half way through the transition to everyone having a smart phone.
  • SmartPhone Penetration is highest amongst the 18-34 group with income above 75k.  Soon the trend will be everyone.
  • Android and iOS are dominant. But developers prefer iOS due to Androids handset fragmentation
  • Mobile ad revenue is estimated at $800 million currently. Google is dominant taking 64% of the market share.
  • Only 1% of ad spending goes to mobile currently, however the consumer spends 23% of their available time on a mobile device.
  • Apps can generate a ton of revenue on mobile platforms and spread very quickly. However, overall share of mind is limited. Each new app may take user time away from another app.

What does all of this mean for the future of online advertising?

There are a few things not mentioned in the presentation which may help us understand how this will affect online advertising.
When people are online at their computers, or watching TV, they always have their mobile device with them.
Most advertisers already realize this and have started to launch integrated ad campaigns which ask you to complete an action on your mobile phone while watching a show. Twitter and TV integration is quite widespread now, you will notice most shows now have hashtags on the screen during the show.
The possibilities of how these two industries will be integrated is quite limitless. For general marketing purposes I think you will start to see overall ad budgets increase overall. The whole advertising ecosystem must be looked at in a holistic manner.  Often times TV ads actually boost the performance of online ads since they ad validity to the company advertising. EG – If they can afford to buy a TV ad they must be a real company and somewhat trustworthy.
On slide 27 of the Future of Mobile deck, you can see that TV still gets the lion share of ad dollars. I don’t see this changing in the near future. Especially as TVs become more connected. Once Apple or Android release a TV/Computer hybrid you will see a massive change in your TV experience. Imagine having a prime time show up and a browser window up on the same screen, and a mobile device on hand.  Also, it is highly likely that your phone becomes your remote. Not only is it in the room, it will actually be integral to your viewing experience.
Consumers will have incredibly short attention spans since they are trying to pay attention to multiple devices at the same time.
What we have established here is that the new electronic mediums play nice with technologies like TV and Radio.

Does Print Media have a future?

In my opinion, no. Print and digital devices are redundant. Even as much as I like holding a physical book or newspaper, the ability to deliver content faster and cheaper online will win.
Print excluding things like billboards (there is no replacement for those yet) takes a huge amount of ad spend but yields low results. The postal system is a key indicator of this industry collapsing. People are able to get their NY Times on the iPad now. Why kill a tree for something you are going to read for 5 mins?

Will the desktop still matter?

In the short term (2-5 years) people will still use desktops since they are important in work environments and portable devices are simply not big enough or strong enough for an 8 hour day.
Web based ads served to desktops and laptops will be important but the level of targeting will be antiquated compared to things we will be doing in mobile. For decades people have been able to pick demographics to target, but micro-targeting based on demographic, time, location, who you are with, personal influence, etc… will increase click through rates and overall engagement.
Ad networks will take that and charge premium rates due to the high level of engagement. Expect mobile ad rates to go up but not skyrocket. There is a ton of inventory out there. If supply was limited it would make the rates skyrocket, but inventory is outpacing advertiser interest at the moment.

As a media planner where should I start buying?

If you are an online media planner, it is important to learn how to buy on TV. I can’t stress this enough. The online world and TV will merge. Not knowing how to buy on both platforms will hurt your career and your clients.

Secondly, start setting up test buys on mobile. Inventory is cheap now, you can afford to make mistakes. Focus on what happens from an operations perspective to make sure the customer’s experience is a high quality, and quick experience with your company. Focusing on your short term eCPM or eCPA will not give you the learnings you should be focusing on.

The key to a long term strategy is really designing a pleasurable customer experience on a small screen or via voice.  That is what makes people buy, come back, and tell their friends.  Creating an experience that mimics your web checkout or form flow will kill your campaign. No one wants to fill out 15-20 fields of info on a tiny screen. Time is crucial. Most people will have various push notifications, text messages, new emails and other distractions coming through during your checkout process. Making sure your flow is quick is not just important it is the cornerstone of your mobile strategy.

Sometimes as a media planner, it is important to know where not to buy. It is time to move away from print. Go up to any hipster and ask them the last time they bought a magazine or a newspaper. Most likely they will spend their $3 on a fair trade cup of coffee instead of a magazine they can get online for free.   Print media has no reliable metrics. With so many tools available these days, why invest in something that can’t tell you if it was the right choice or not?

Mobile is just getting started. Start now, learn while it is cheap. It is our inevitable future.

Exponential Interactive IPO S1 filed

Exponential Interactive, an Emeryville, CA based ad network filed for an IPO on March 16, 2012.

The Exponential Interactive original S1 can be found here.

Here are some interesting details from the S1 filing:

  • Exponential’s CEO – Dilip DaSilva owns 74.90% of the shares currently. His family trust also owns an additional 5.11%.
  • They are looking to raise around $75 million dollars
  • The current stock price for accounting purposes is $2.75. This assumes a 6.5x multiple.
  • They are operating in 25 countries.
  • They have closed down their EDU lead generation division and are in the process of transitioning the clients to CPM buys on the core network. Their EDU product generated 5% of the 2011 revenue which equates to ~$8.45 million dollars. If they can not transition these clients to the CPM side of the business they expect to see a 5% decrease in revenue.
  • The Full Tango direct response is not mentioned much. In fact revenue is not really broken out by division.
  • The majority of international growth is coming from a physical presence in each country and increasing the number of sales people internationally.
  • The acquisition of AdoTube, a Ukranian video site will cost Exponential around $19 million dollars after all the earn outs are completed.
  • A major margin builder for the company has been acquisitions of content sites like
  • 2011 Gross Margin is 43.3% which is slightly above the industry standard of 40% for ad networks.
  • Gross Revenue Growth from 2010 to 2011 was 35.2%.
  • Stock symbol will be “EXPN”
  • International revenue grew 80% from 2010 to 2011. US revenue grew 20% in the same time period.
  • AdoTube generated around $10.3 mil in revenue in 2010 at a 54% gross margin.
  • $14.2 mil in cash on hand at the end of 2011.

Overall, Exponential is a solid company throwing off a healthy amount of cash each year.

There are some concerns to note in the S1 which could play into things over the coming months:

  • A change by large competitors like Google, Facebook and Yahoo! could alter the advertising landscape completely.  Is this anything new? No, but a company’s ability to navigate these changes and adapt to them will be key to their long term success.
  • The CEO is named as a risk because of his involvement with the core technology and his large percentage of ownership.  He has had a solid track record with running the company but how will the pressure of being a public company affect him? Will he be able to balance working with shareholders and working on the core tech platform? If not, will Alex the CTO be able to lead the tech platform into new areas?
  • There is no clear mobile strategy. Mobile ad inventory is increasing rapidly and taking away from desktop based inventory. Engagement rates are sometimes higher on mobile devices which could lead to greater top line revenue. However, Exponential does not mention a clear way to penetrate this market. This could severely limit growth potential long term.
  • Their international footprint is highly subject to currency fluctuations and global economic factors.
  • More than 80% of their revenue comes from recurring clients. Are they able to penetrate into new advertisers or has their inventory not that attractive? Or have the advertisers started to move more budget towards social platforms like Facebook?
  • From a competitive standpoint, it is hard to say if any of the ad networks have technology that is really differentiated. Even if they do, the lead that may develop from a differentiated technology is mitigated by the inventory they represent. The core of the network is really the relationships they maintain with their publishers. A significant risk is that these publishers are rarely loyal.

The above information is not intended to be financial advice in any way.


EDU is ripe for disruption – SXSW – EDU 2012

The Education industry had a major presence at SXSW Interactive 2012. There were folks from the traditional schools, various technology providers, book publishers, and of course students.

The major themes from the show point to a potential tectonic shift in the fundamentals of how to deliver knowledge, how to measure knowledge and what today’s definition of knowledge is.

All of this was rooted in the following problems with Education these days:

  1. Education is too expensive, especially at the higher education levels
  2. Learning materials are outdated before they are printed
  3. School budgets are being cut
  4. Manufacturing jobs are expected to decline and the need for knowledge workers continues to expand
  5. New technologies allow for different types of engagement, does the concept of testing book knowledge still work?
  6. Attention spans of kids these days is becoming shorter
  7. Interest levels in key areas like Math and Science have been suffering especially in minorities and women
  8. Class sizes in the K-12 sector are too big, and many kids are slipping through the system
There is no doubt that Education has some issues. Did the SXSW 2012 conference fix any of those issues? Not at all. But it was highly effective in putting attention on the issues. I also think there are some exciting technology platforms which are helping reduce the cost and scale issues.

EDU has 3 Macro Level Issues:

  1. Cost
  2. Scale
  3. Jobs
Ultimately any form of education is intended to prepare you for a job or way to generate value for the economy. Some may argue against this but the reality is that we need to train people to keep our economy strong.
From a cost perspective, some of the most interesting models revolved around just flat out free courses.
  • – Spawned from the Stanford AI course, this follows the MOOC methodology and offers a certification at the end.
  •  – this has become the darling of the industry especially within the math community. Delivering high quality lectures about complex topics.
  • MITx – MIT has been putting its courses online for a few years now, but more recently they re-focused and are now allowing for certification under these free courses.
From a scale perspective, there are a few approaches out there that were highlighted during SXSW.
  • – an online learning platform which allows regular people to teach others. You can either charge or host free courses. The courses can be broken up into chapters, you can host slides, videos and lecture notes in one place. You also get to see what other students are taking the class.
  • – this site is focusing on local real life gatherings to teach any topic. For instance if you are Photography pro, you can find a class in Austin teaching you about digital flash photography. The course is taught in a local bar, church, outside, and for a fee usually. It is a great way to learn new things and usually focuses on passion topics. Consider this the of education.
  • Virginia Tech’s – – Prof. Boyer teaches a physical class of 3000 students. He uses tools such as Twitter, Facebook and to interact with his students and assess them.
From a job perspective, there weren’t any platforms which allowed you to verify what you have learned. My guess is that most employers will take years to change their job requirements of “bachelor degree required” and realize that many students will not have degrees.
  • This is a major opportunity for anyone interested in building a verification system that employers will use. Consider this a Klout score for a highly dynamic education which may be drawn upon from a variety of sources.

What does this all mean for the For-Profit EDU sector and the future of the US Economy?

For the for-profit schools, there are some great opportunities to buy into these platforms. Why? Because they are amazing lead gen vehicles. People are already self identifying that they are life long learners and willing to commit to a schedule. These are key factors in creating high LTV students for schools.
Schools don’t want to give away free classes all the time. Why not let these sites help students get more accustomed to online learning and then sell them on your brand rather than jumping over the hurdle of teaching them about online learning?

The other benefit of these platforms versus the current online classes is that they help create long term communities based on interests. These platforms are built around social so they automatically pull from the social graph and help find new connections based on real world interests. As an on online student if I know more about the other people in my class, the more likely I am able to draw support from them. It is also a good way of learning when you can start to argue a point of view on a topic, which increases your critical thinking skills and knowledge retention.

From a technology perspective, these new platforms highlight that the new device formats are enabling much richer learning experiences. You can have a shared workspace while video chatting with other students on a iPad  these days. Why are our schools focusing on an one way old format of video lectures? The key is not just being social, but it is about convergence. How can we leverage video, the social graph, and instant communication to create higher knowledge retention and much higher levels of engagement. The focus must shift from learning to pass a test to learning because you are truly interested in a subject.

Another major point of the new technology platforms is that the courses are asynchronous. They allow people to learn when they have time. Most people drop out of school because they have a major life event which reduces their free time. Why not be able to pay for a course and learn it for a period of 2-3 years? Why can’t the online schools be more flexible for the reality of life?  Loyalty and brand in the Education space will be built upon not only the quality of education but it will also be based on the “realness” of the education. Does the school realize I might have a kid this year? Does the school realize I might lose my job this year? Does the school teach me what I really need to know for my dream job?

From a cost perspective, I think schools will start to offer a la carte degrees. The requirements of liberal arts classes in an economics degree are what upset people these days. You have to $50k a year to learn stuff you have no interest in. How about I spend $30k and learn exactly what I want and need? Online schools are capable of shifting resources from an operational perspective much faster than a traditional school. Why not take advantage of this “curated approach” to learning and create more students that stay in school.

The US economy has much to gain from these platforms. It will enable thousands to learn new skills necessary for non-manufacturing jobs. The learning platforms also preserve older trade skills which are quickly being lost, for instance how to make jelly at home.

None of these new platforms will drive major long term growth for the economy unless employers accept them as valid learning systems.  The term “life-experience credits” will be increasingly important. From a financial point of view, these new learning systems delivering value at scale and in a cost effective format will help reduce our dependence on student loans and allow for greater expendable income at a younger age. Imagine how many more 20 year olds may purchase long term assets instead of servicing their loan payment?  From a macro economic point of view will drive significant increases in wealth and lead to greater stability in the economy.

I think EDU is being targeted for a disruption, especially under the current Democratic administration. Will this top down approach yield a true revolution in EDU? It is too soon to tell, but November 2012 will be a good time to check in again….