Content Matters

On Customer Care, AT&T and the iPhone

Customer care should always be at the heart of any company; in this economy that goes double. That's why I'm continually amazed by the poor level of customer service provided by so many consumer product companies.

Near the top of that list is AT&T. If AT&T took a strategic view of things, they might view the iPhone as an amazing lead generation device. Through the iPhone AT&T is gaining millions of subscribers who would never otherwise switch to AT&T. However, they know that their window of exclusivity won't last forever. Whether Apple chooses an additional partner this summer or renews the exclusivity for a year or two longer, the deal has a finite life. So, the strategic view from AT&T should be to use this period to deliver excellent service and quality so that users will stick with the company even when other carriers can offer the iPhone.

Well, that would be the strategic view, but the reality is far from it.

Last week, in preparation for a trip to London, I tried to activate an international dialing plan on the phone. I'd used the plan previously, but since my overseas travel is modest, I turn the service on and off as needed, rather than incurring a monthly fee when I don't need it.

I won't bore you with the details here, but after spending 15 minutes online, then 45 minutes with their call center, then a 30-minute drive to an AT&T store, they were unable to activate my calling plan.

So, as I arrived in London, instead of using AT&T to make calls, whenever I've been connected to WiFi (particularly in my hotel room), I've used Skype on my iPhone. Rather than paying the discounted $0.99 per minute or non-discounted $1.29/minute rate, I'm paying about two cents per minute to Skype and AT&T gets nothing but my continued enmity.

AT&T CEO Randall Stephenson has been quoted saying that he believes that customers who sign up for the iPhone are becoming loyal AT&T users. Well, the next loyal AT&T wireless user I meet will be the first.

Upcoming Events

Despite the onset of summer (or, perhaps, in light of the non-summer-like northeast weather), there are a number of interesting content industry events coming up.

This Wednesday, the SIIA is hosting a brown bag on mobile delivery platforms. The panel discussion, Google, Kindle, iPhone: How to Leverage Hot Content Delivery Platforms for Profits, will be moderated by Mr. Content Nation, John Blossom and features Alisa Bowen, Head of Consumer Publishing at Thomson Reuters; former WSJ publisher and co-founder of the new Journalism Online, Gordon Crovitz; and Chris Kenneally of Copyright Clearance Center.

It should be a fantastic panel; you can register at the SIIA conference site.

Few areas have felt the impact of technology and social media more than politics, as evident by the most recent US presidential election. The 6th annual Personal Democracy Forum, to be held June 29-30 at Lincoln Center's Rose Hall, will bring together political practitioners, technologists and journalists (traditional and alternative) to explore the impact technology is having on politics and what the potential ramifications will be for society.

The event has a star-studded lineup of speakers including Craig Newmark, US Gov't CIO Vivek Kundra, 538.com's Nate Silver, Ana Marie Cox, Twitter co-founder Jack Dorsey, Frank Rich, Clay Shirky and more.

Our friends at Gotham Media Ventures have arranged for a $100 discount on PdF tickets for Content Matters readers. When registering at the Personal Democracy Forum, use code gothammedia for the discount.

Speaking of Gotham Media, they will be hosting a breakfast panel on the future of media July 8. Entitled "Media in Crisis: Is There a Way Out?", the panel features Andrew Heyward, former President of CBS News, Air America Radio CEO Bennett Zier, Jason Klein, CEO of Newspaper National Network and Eric Dezenhall, founder of Dezenhall Resources, a crisis management firm.

This panel is part of Gotham's Innovation series, which focuses on content and technology. With great panelists, it should be a lively discussion. I hope to see you there.

Half of Asset Management Firms Losing Money $$

According to BlackRock vice chair Bob Doll, "as many as half of the world's asset managers are breaking even at best".

This week's Economist take an interesting look at the asset management industry, in light of the BlackRock acquisition of Barclays Global Investors. According to the article, more banks are expected to put their asset management divisions on the block, as revenues shrink and profits get squeezed.

It wasn't supposed to be this way. Unlike market-sensitive businesses like proprietary trading and investment banking, the asset management business was a safe business with a predictable fee-based revenue stream. That led to many acquisitions of asset management firms in the past ten years. But the past year has brought challenges, while some of the anticipated cost savings from scale have failed to materialize.

I would guess that a lot of the margin erosion is simply due to firms' expanding their cost structures during the boom years. With assets under management growing each year from a combination of investment growth and new contributions to 401(k) funds, it's easy to see how many firms became less efficient. At the same time, while marketing directly to institutions is fairly inexpensive, marketing your services to a retail audience can become costly.

The article also points out one of the structural challenges facing the industry that should have been apparent all along: the fund management industry doesn't scale as well as other businesses. The most lucrative side of the business has always been active management, where fees can range from 60 to 150 basis points or more. Indexed management fees are much lower - typically 20-30 basis points. But it's almost impossible for active managers to consistently beat the market as they grow. As funds grow, it's inevitable that their holdings make them more and more like the major indices. They can't possibly take large enough positions in small caps to impact performance as they grow.

Where will the industry go from here? While giant firms like the newly re-Christened BlackRock Global Investors, T. Rowe Price, Fidelity and Vanguard will surely continue to grow, we may see the active management sector again become decentralized with smaller, independent firms handling much of the load. Private equity firms like TA Associates can take a stake in multiple smaller managers without impacting their ability to invest in small caps. But it may be a while before we see strong growth and profitability in this sector.

Please Contribute: New Yorkers Without Summer Homes

OK, I borrowed the title concept from a comic (might have been Robert Klein but can't recall) who joked about setting up a foundation for New York Jews who didn't have a beach house. But that's the thought that popped into my head this morning as I read about Unithrive.org in the New York Times.

If you didn't read the article, entitled "I’m Going to Harvard. Will You Sponsor Me?", it describes what seems like a compelling program of peer-to-peer lending to students in need.

I'm a huge fan of peer lending and microlending programs. I've been a consistent supporter of Donor's Choose and am also a fan of Kiva. These programs bring transparency to the donation process and have demonstrated hugely impactful results. And I'm sure that Unithrive may provide similar benefits. But reading the article, you can't help but wonder how out of touch some of these people are.

I'll start with Unithive cofounder Joshua Kushner, quoted in the article as stating "I have friends who would spend 10 hours a week when they are not in class working at a coffee shop or in the dorms,” said Mr. Kushner, 24, referring to time that he considered wasteful. Josh is currently working at Goldman, Sachs and will soon be entering Harvard Business School.

Now, Josh may feel that working in a coffee shop or in the dorms is a waste of time. And I'm sure there are others who might agree. But, I disagree. I spent five nights a week tending bar for most of my college years. And while you can argue that I may not have learned a lot serving beers and shots at O'Heaney's, it tought me how to manage my time and to be accountable for all aspects of my student life.

Nor do I feel much support for Ricky Kuperman, a Harvard sophomore also interviewed in the article.  Ricky, a dancer, said in an interview that he wanted the $2,000 no-interest loan to visit Okinawa, Japan, in 2010 to spend time in the birthplace of karate. “If I don’t get the money, I will have to work longer next summer or during the term,” he said.“It will allow me to stay in shape and make getting cast in films or in dance projects that much more possible.”

These may all be wonderful opportunities, but they come off more than a bit tone-deaf, particularly in the current environment. College isn't necessarily about leading a privileged life where you can focus all your efforts on academics and adventure. College is about preparing for adulthood. It's about learning to live with others. It's about learning to make concessions and to work hard for the things that you want. The college years are also a great time to learn about real life - perhaps working at that coffee shop, Josh's friends might have the chance to meet a single mother who uses that job to put food on the table for her family. Perhaps it provides a dose of reality that Josh is unlikely to get at HBS or at Goldman.

My daughter is still a few years away from being ready for college. And while I don't want her to have to work five nights per week, I do want her to work during college, so that she continues to develop the values which will guide her adult life.

I have friends who had to take time off in the middle of college to earn enough money so they could finish up a year or two later. And I'd be happy to participate in a peer-lending program to help students be able to afford their tuition or rent. But sending a young person on a trip to the birthplace of karate or backpacking across Europe? Sorry, I'll direct my funds to Kiva or DonorsChoose in that case.

(Josh Kushner photo sourced from Gawker)

To dominate smart phone market Apple should drop AT&T for Verizon

Dropping the entry price for the iPhone to $99 will, no doubt, put added pressure on Palm, RIM and others looking to enter the smart phone market. While total cost of ownership of the Pre may be lower, I think most users rarely consider that and by dropping the entry price, they will make the iPhone more attainable for many users.

According to GigaOM, users of the existing iPhone 3G phones (like me) won't see the new data speeds being touted for the new phones.

While the new 3G S will be compatible with High Speed Packet Access (HSPA) 7.2 technology, which offers theoretical peak download speeds of up to 7.2 Mbps, though actual speeds will vary as these capabilities become available. AT&T plans to begin deploying HSPA 7.2 later this year, with completion expected in 2011.

That news will hardly ingratiate iPhone users to AT&T, a love-hate relationship that's got very little love in it. Most iPhone users tolerate AT&T only because it's the sole carrier unless you want to hack your phone. Despite AT&T CEO Randall Stephenson's beliefs, I don't think there are any iPhone users who really like AT&T.

In fact, I think the one move that Apple could make to dramatically increase iPhone market share would be to kill the exclusivity provision with A&T and strike a deal with Verizon later this year. Today, the two carriers' networks are incompatible, so Apple would have to manufacture two versions of the phones. But that may be a modest cost to pay in order to dramatically increase sales. The key question is likely to be how aggressively AT&T will continue to subsidize the cost of the phones in order to keep exclusivity. But, with Palm, RIM and even Nokia stepping up their game, the time may be right for Apple to reach out to Verizon.

A Sale is not a Partnership

Your company providing goods or services to me in return for cash is not a partnership. Yet I get emails all the time saying "looking to partner" or "We would like to partner with you" from recruiters and other vendors of goods and services. I also get a cold calls from overseas call centers making the same pitch.

Now, perhaps that headline improves your email open rate and maybe (though I would be surprised) it actually leads to real business. But for me, it's a quick way to state "I'm dishonest and I'd like to do business with you".

Earlier in my career, when I ran a sales organization, I used to be able to determine in the first 60 seconds of a cold call which sales training the rep had been to. Was it SPIN, Miller Heiman, Selling to VITO or the dreaded "Getting to Yes" approach? Each of those processes, when applied correctly, can help improve sales performance (OK, I'm not so sure about the annoying Getting to Yes approach).

I'd guess that this new "partnering" claim probably is derived from the book Stop Selling and Start Partnering by Larry Wilson. I've never read the book, and I'm sure that Larry Wilson is a nice enough chap, but trying to rebrand your existing sales process as partnering just isn't going to cut it. To use an overused cliche of the past year, it's just lipstick on a pig.

I've been in the technology space for more than 20 years and have struck many partnerships. A partnership is when two or more organizations collaborate to come up with ways in which they work together towards a common goal, generally each bringing various things to the table. While a partnership may involve one company writing a check to another, that's not the primary focus of the partnership. Partnerships require shared risks and shared upside.

So, before you ring my phone and pitch me on a partnership, think about what you're about to pitch. Are we truly collaborating, sharing risk and enjoying mutual upside? Or, are you about to ask me to write a check for your goods and services?

Professional Blogs Turn to Research for Added Revenue

In recent years, the line between blogger and industry analyst has been continually narrowing. For technology professionals in particular, much of the product and industry analysis that came from IT analyst shops has largely been replaced by blogs. That's not surprising. Many IT analysts now blog and others who have left the big shops like Gartner or Forrester have started independent blogs.

What's interesting is that now, as the online advertising market has dried up, a number of professional bloggers are now turning to paid research as an additional driver of revenues.

Today GigaOM announced the launch of GigaOM Pro, a subscription-based syndicated research site, that will be available at the modest price of $79 per year. GigaOM Pro will focus on a handful of tech sectors - Green IT, Mobile, Infrastructure and Connected Consumer - and will use both internal resources (newly hired Research Director Michael Wolf, formerly of ABI) and freelance analysts.

Last year, ContentNext, publisher of PaidContent, MocoNews and ContentSutra, hired ex-Merrill Lynch analyst Lauren Rich Fine to head up a proprietary research effort. They've released a few detailed reports, most recently a social media report called Following the Money.

Earlier this month, ReadWriteWeb released their first premium report - ReadWriteWeb's Guide to Online Community Management, a combination of case studies, best practices and an online component which aggregates relevant stories on the topic.

And, it's not just technology companies. Financial blogs are exploring the same paths. Footnoted.org recently launched Footnoted Pro, a subscription-only online newsletter which provides actionable research, augmenting the basic information on the free site.

Meanwhile, StockTwits (while not a blog) has announced StockTwits Premium, an a-la-carte offering of research and tools for its active trader community.

Blogs are morphing into traditional b2b media companies, with three revenue streams: advertising, paid research and conferences. And that's going to raise the bar on the traditional analyst research firms to deliver greater value.

Twitter Quitter Issue a Canard

I'm amazed at how much hype I continue to see about the Twitter Quitters - the stat reported by Nielsen that 60% of new Twitter users are no longer using the service after 30 days.

Story after story quotes this figure and talks about how it it portends problems for Twitter.

That's a bunch of nonsense!

The high abandonment rate among new users is largely attributable to two factors:
1. The huge hype that has occurred, where millions of people who are unlikely Twitter users suddenly give it a shot.
2. The non-existent cost barrier to try Twitter as a user

First, let's look at the hype factor. The hype cycle hit its peak in April, when Oprah used Twitter and CNN and Ashton Kutcher had their contest to see who could hit 1 million followers first. These events brought literally millions of new users to the Twitter signup page, many of whom had no idea what they were signing up for. Are you a fan of Ashton Kutcher? Well, click here to help him win the contest. Do you like Oprah? Have you bought the books from her book clubs? Well, now, take a minute to sign up for this thing that she says is pretty cool.

But the demographics of many of those new users did not suggest someone who was likely to become a regular Twitter user. Just think about the people who've probably asked you about Twitter in the past 60 days.

For me, the tipping point was when my mother-in-law, a 75-year-old woman who's never used a computer (nor flown on an airplane, but that's a different story) asked about it. If she had a computer, she might have been willing to try Twitter, but there's no way she'd give it more than about three minutes.

Second is the ease in trying Twitter. It's free and doesn't require the user to download or install anything. Basically, if you're willing to register, you're now  a user.

Taken together, you have a huge audience of people who probably did not understand Twitter, but were willing to invest two minutes to register because it seemed momentarily of interest.

Now take a look at what we know about Twitter. First, the network effect is critical. Until you follow at least a few dozen people, there's not much to read, and until you have a similar number following you, conversations don't occur. So, if you signed up to follow Oprah, you might see one or two tweets per day. Not a very exciting user experience. Twitter only works when you follow a community of like-minded people. That happens when you are introduced to Twitter by friends, business peers or other communities. It doesn't happen when adoption is driven by the mass media and celebrities.

The original Nielsen study compared the Twitter retention rate with that of MySpace and Facebook, which each achieved 60% retention at a comparable level of users. But those comparisons make no sense. In the early days of Facebook, usage was spread among college students, a perfect peer community. MySpace adoption was largely among teens - again, perfect for viral growth.

To assess the real retention rate of Twitter, it would be useful to eliminate those casual users who joined Twitter to follow Oprah or Ashton or CNN but never got engaged. I'd like to see what the retention rate is for those who reach a minimum level of engagement - perhaps following ten or more users, posting at least ten tweets and, say, adding their own image to their Twitter profile. I'd guess that retention rates among users who meet those criteria are significantly higher than 40%.

Based on that, I think that the Twitter Quitter issue is largely a canard, though the overall number of Twitter users is also a bit of a mirage, since it includes a lot of these one-time users. Rather than 32 million users with a 40% retention rate, the real figures are probably closer to 25 million users and a 50% retention rate.

Going forward, as Twitter looks to become mainstream, retention rate will be critical. Twitter will be well-served if it continues to cultivate a strong ecosystem of communities. It will be these grass roots communities of interest that will fuel Twitter's growth, not mass-media driven hype.

What do you think?

Open Table Should Buy Yelp

There was much celebration yesterday at Open Table's (NASD:OPEN) successful IPO. In this market, any IPO, especially a tech IPO is cause for celebration, and Open Table shares jumped 50% to more than $31 during its first day of trading after being priced above the initial $16-18 range.

 On its merits, Open Table is not that great a story right now. Restaurants are hurting in the current economy and the company lost $1M on revenues of $56 million in 2008, before things got really bad. More than half their revenue stream comes from the flat fees which they charge restaurants, so that should be somewhat predictable, but will certainly take a hit as restaurants shut their doors. The variable revenues, based on individual bookings will be at even greater risk until the market returns.

While Open Table has strong relationships with restaurants, what would make it a much more interesting company would be to reach out to the consumer side. An Open Table acquisition of Yelp would close the loop, allowing users to search reviews, then book their reservation on one system. It could also create new markets for Open Table. Yelp is well-positioned to become a dominant player in local advertising, and Open Table could potentially serve as the intermediary between buyers and sellers in those local markets. Adding user-generated content and social media to Open Table would position it for future growth as it would be embedded into the daily activities of its core audience. Open Table is a web 1.0 survivor; Yelp brings the newness of the web 2.0 environment and business approach and a nearly obsessive focus on the user.

Of course, Open Table and Yelp have been polar opposites when it comes to their corporate culture.

Open Table has served the restaurant and not focused its efforts on the consumer, while Yelp has shown a willingness to alienate restaurants in order to preserve its customer focus. Could that philosophical divide be bridged? It's worth exploring.

At an estimated valuation of $200 million, Yelp would be worth a third of Open Table, based on its current market cap. But together, the two would be well-positioned to become dominant players in local advertising across a multitude of consumer industries.

Wolfram Alpha: A Well-Hyped Niche Search Engine

Wolfram Alpha launched last weekend to much fanfare. In fact, this scientific search engine received the most hype I can recall for a tech launch since Dean Kamen's Project Ginger (aka the Segway). Of course, today, we're all navigating the sidewalks on our Segways and cities have been "architected around the modern transportation system" (as once predicted by Steve Jobs), so in a few months most of us will barely remember what Google once did.

Sarcasm aside, Wolfram Alpha is an interesting application. Characterized as a "computational knowledge engine", Wolfram Alpha aims to compute answers based on facts stored within its knowledge base. To some extent, it is more Wikipedia than Google.

Its greatest strength is in performing calculations. While Google can do this as well (provided that the formulas are structured correctly), Wolfram Alpha can perform more complex calculations and seems to do a better job at recognizing various constructs of a formula. That's not surprising since Wolfram Alpha is built on top of the Mathematica software created by its founder.

But Wolfram Alpha is largely constrained by its knowledge base. It's as much a content company as a technology company, and as such, its ability to answer questions is based upon the depth of information in its knowledge base.

Beyond mathematical formulas, the Wolfram Alpha knowledge base seems deep in scientific knowledge, not surprising based upon the pedigree of its founder. You can compare the mass of two planets, compute the airflow around an airfoil or compute someone's body mass index.

For most users, however, Wolfram Alpha seems likely to disappoint. One clue to this is the sample searches they present on their home page - enter your date of birth or the city in which you live and Wolfram Alpha returns a list of people born on the same date or basic facts about your city, derived from the CIA World Factbook. In fact, for non-computational queries, Wolfram Alpha seems to me like an online almanac. The last time that I looked at an almanac was as a child, so I'm not quite sure why I'd want one now, but the next time that I need to know what the weather was on the day I was born, I guess I can turn to Wolfram Alpha.

My challenge in using Wolfram Alpha is that there are already individual sites that provide me with most of the answers it can offer. Today's weather in London? I can find that on Weather Underground. The distance between Boston and Cape Code? Google Maps or Mapquest will suffice. Wolfram Alpha consolidates a lot of that information (and might make for a useful iPhone app) but it's hardly the game-changer that it has been hyped to be. So, when I need to compute binomial coefficients, I may jump on my Segway and fire up Wolfram Alpha, but for most of my day-to-day search needs, I'll stick with Google.