Content Matters

A couple of months ago, Fred Wilson blogged about his favorite business model, where web companies provide free use of their basic service, then offer premium versions and add-ons, available for a fee. As Fred pointed out, many successful companies have adopted this model (Skype, Flickr and Trillian, among others).  Fred closed his post asking if there was a name for this model, and if not, what might be a good name.

Alacra's Jarid Lukin proposed the name "Freemium".  And, from the looks of it, it seems to have stuck.

Tom Evslin used the term yesterday, in describing the Feedblitz business model.  Feedblitz is familiar to those of you who read Content Matters via email.  It takes my RSS feed and wraps it into an email and sends it to users who don't want to deal with RSS.  It performs its job admirably, while costing me nothing.  Under the Freemium model, Feedblitz charges for personalization of the emails and a frequency of more than once per day.
This week's issue of Wired Magazine also includes a reference to the Freemium model, in its article, Blogging for Dollars.

This chart, from Technorati, shows how the term Freemium has expanded throughout the blogosphere.  Its first appearance was in a March 23 follow-up post from Fred and was subject of a flurry of link love in the two weeks that followed.  Since then, it's appeared on blogs 223 times, and that doesn't include the mainstream press like Wired or other websites.

The Freemium model has been around for a while, but seems to be flourishing in the Web 2.0 world.  And, it's interesting to see the language spreading as virally as the applications themselves.

Ratings and reviews, such as those offered by Amazon, TripAdvisor, Zagat and ePinions, are one the most compelling forms of user-generated content.  When done well, ratings provide readers with a way to make better purchase decisions in a time where unlimited choices create confusion.

But, what happens when the ratings cannot be trusted?

This week, the Dixie Chicks released a new CD, Taking the Long Way.  The Dixie Chicks, originally a  popular country band, caught the attention of many of us three years ago, just before the start of the Iraqi War, when they told a UK audience that “we’re ashamed that the President is from (our home state of) Texas”.  At that time, when questioning the administration was tantamount to active support of terrorists, they became immediate pariahs.  Country music stations refused to play their music and they received numerous death threats.

Three years later, the Dixie Chicks have released their new CD.  The music style itself has changed.  Traditional country twang has been replaced with a more folk-pop sound, reminiscent of Roseanne Cash.  That, in itself, might result in some unusual ratings, as their traditional listeners might be disappointed, while listeners who might not have given them a listen in the past might find themselves fans.  But, what’s driving the Amazon ratings of this CD is less the music than the politics.  A one-star review on Amazon starts with “Lets get up and show your back side and talk trash, just to keep your self in the spot light, the CD sucks and I wouldn't buy it, I don't have anything by them and turn them off every time they come on the radio.”  Well, if you don’t listen, how can you review it?   

The Dixie Chicks are just the latest example of this.  Take a look at ratings for books from Al Franken or Ann Coulter.  I would guess that three-quarters of the reviewers have not read their books.  For those authors, five stars means “I love your viewpoint, even if I've never read this book”, while one star means “I hate your politics”.  Meanwhile, etailers have to contend with  suppliers trying to game the system, giving their own products and services high reviews, while bashing the competition.

What can be done to address this?  First, we can look at whether the “star system” is the best way to show ratings.  Sure, it’s easy for users to view the stars or sort by them, but statisticians have long known that “mean” is one of the weakest measurements.  A simple distribution of ratings might tell a better story.

For example, let's look at the distribution of stars for two books that each have an average rating of 3.5 stars.  The green on, on the left, has most of its reviews giving it 3-4 stars.  The blue chart on the right has very little in the mid-range, but has a lot of 1-star and 5-star ratings.  By reading a few reviews, you’d get the context of why the love-hate relationship exists (is it the product, or something else).

Another option is to force users to provide their real names, or at least validate their registration by email.  This will reduce the number of fake or duplicate entries, although it may also reduce the overall participation level.

What ideas do you have for making ratings and reviews more trustworthy?  Please post your comments or your thoughts.

USA Today broke the news that Yahoo and eBay have formed an advertising alliance.

The basics are that Yahoo will be the exclusive provider of third party display ads to eBay, while also committing to accept (eBay-owned) PayPal payments for Yahoo services.  With eBay as the 9th most visited site, Yahoo gains a huge number of additional page views to serve its ads to. 

One of the more interesting aspects of the announcement is the comment that the two companies intend to jointly explore “click-to-call” technologies on their respective websites.  Click-to-call technology has begun to take hold for certain buyers’ guides and directories, led by companies such as Ingenio and eStara.

Click-to-call technology can help close the loop between buyers and sellers, turning leads into transactions.  It will be interesting to see how these two leaders utilize click-to-call to offer new solutions to internet advertisers.

As I’ve indicated in the past, while Google gets most of the attention in the world of search, Yahoo’s diverse revenue base creates many more lucrative opportunities.  While Google’s growth is tied to the number of searches users do (and the ratio of searches to ad clicks), Yahoo’s model lets them monetize general Internet traffic more effectively.

UPDATE: Rafat Ali provides a summary of analyst feedback to the alliance.  All fairly bullish on the partnership.   Mark May of Needham  does a better job than I do of outlining  the strengths of Yahoo's diversified businesses: "We believe this deal also highlights YHOO strengths over GOOG and MSFT in certain important areas: 1) leading graphical advertising capabilities, to enhance EBAY’s revenue streams (MSFT is also strong, GOOG in development); 2) strong search market share, to enable EBAY to generate more traffic (GOOG strong; MSFT in development); and 3) a number of premium services and e-commerce properties, in order to power PayPal (GOOG and MSFT both lack scale here)."

Much of the debate the past week or two over the NSA data mining activities seems to be misdirected.

Critics of the program talk about how the Government should not be allowed to use data mining tools to monitor activities of the public.  Meanwhile, defenders of the program fall back on the old “if you don’t allow us to do this, you’re just helping the terrorists”.  Like many debates in Washington these days, this one is unlikely to result in meaningful results unless the focus is shifted.

Data mining is a technology that’s been around for more than two decades.  Ever since the early business intelligence software providers made the “beer and diapers” argument, companies have used data mining to understand customer behavior.  In fact, some of my favorite companies use data mining to improve my customer experience.  For example, Amazon uses data mining to recommend products to me, based upon past purchases. 

The law enforcement community has only recently begun to use data mining.  Sophisticated investigators use link analysis tools such as I2’s Analyst Notebook to help identify connections between people, places and activities.  During the past five years, the intelligence community has begun to explore use of data and text mining applications to improve their results.

In my view, use of data mining tools is a good thing.  Whether you’re a company trying to understand your customers, or a law enforcement agency trying to identify potential terrorists, leveraging technology to automate manual processes is a natural.  But, with these expanded capabilities come new responsibilities.  For corporate citizens, that means transparency.  I allow Amazon to use my purchase and browsing history to make suggestions because they publish their privacy policies and seem to live up to them.  If it were to come out that Amazon were not abiding by their privacy policies (perhaps selling my purchase history to other companies), they would lose the trust of customers and I, for one, would stop shopping there.

In the public sector, transparency is more difficult.  It’s hard to come out publicly and state that we intend to monitor phone traffic to see who’s calling whom.  That could certainly tip off the bad guys (though from everything I have read, the bad guys have long ago begun using internet calling and web tools like the anonymizer to mask their trail).  Rather than absolute transparency, I think that the government needs to demonstrate that it can be trusted.  And, that’s where the problems lie for this administration.  It has been the most secretive of any administration in my lifetime (more Nixonian than Nixon), reclassifying 50-year old documents that were in the public domain, using the courts to keep from disclosing the members of the Vice President’s energy task force and threatening criminal charges against the media.  It also has shown a willingness to violate privacy and national security for political purposes, most notably in the Valerie Plame affair.

I support use of data mining technologies to improve our intelligence.  But, the process requires oversight and, where feasible, transparency.

There’s a similar lesson in here for business.  Your customers will often be willing to share significant information with your company, provided that there are benefits to doing so (either to themselves or to the community as a whole) and that they trust you not to use that information for any other purpose.  Transparency and honesty remain the building blocks of successful information-based businesses.

Footnote: Beer and Diapers
For those unfamiliar with the beer and diapers story, it was the primary example used by sales reps from BI companies for many years.  The premise is that, by mining transaction logs, a convenience store was able to see that on Saturday nights after 10pm, there was a strong correlation between sales of diapers and beer.  In essence, families running out of diapers late on a Saturday night inevitably sent dad out to buy more, and he grabbed a six-pack to go.  In leveraging this information, the convenience store could decide whether to place beer next to diapers (to sell more beer to the diaper dads) or to place them further apart, requiring the dads to go through other aisles, perhaps adding a bag of chips to their purchase.  While the “beer and diapers” story is so oft-told (with many variations) that it has taken on the appearance of an urban legend, it’s origin seems to be based in a true study conducted by Teradata on behalf of Osco Drugs in 1992.

I've given a lot of credit to KnowledgeStorm for the way that they've built their business.  And while I know they are not responsible for the content of their clients' white papers, I have to take them to task for one today.

Having received an email from KnowledgeStorm focusing on white papers for Project Management, I chose to download one of them - a paper entitled "Project Management, Cool?" from software provider @task.  Now, I've read some pretty lame white papers over the years.  I'm used to seeing companies include unsubstantiated claims, repackage marketing collateral and worse under the label "white paper", but this one takes the cake.  The best way that I can describe it is that it seems that someone took a bumper sticker and expanded it to a few hundred words.

Here's a brief excerpt from this two-page white paper:
"Imagine if in the late 1870's when the first transcontinental railroad was being built if railroad project managers would have had enterprise software that could have managed the thousands of workers spread out across the country working on various parts of the construction; or if project managers had the ability to integrate operations with shipping to trigger real-time delivery of the enormous amounts of raw materials.
Now imagine if Henry Gantt, developer of the Gantt chart, would have had access to a powerful computer with broad-band Internet access to help the Navy manage ship construction during World War I."

Despite reading through the entire 2 page paper twice, I never found any details on the product itself, the underlying technology, the specific problems that it addresses or anything else that you'd expect to find in a technology white paper.
This is a white paper?  What were they thinking?

While I cannot hold KnowledgeStorm accountable for the contents of the white papers they disseminate, they are responsible for their own editorial.  And, highlighting this "white paper" as a recommended white paper for project management impacts their credibility as a trusted source of content.   

When you look at the disruptive Internet companies, those that have changed the way that people do business, the first ones that jump to mind are giants like eBay, Google, Yahoo, Monster and Travelocity.  These companies are all generating huge revenues and have transformed their industries.

But one of the most disruptive Internet companies of the past few years is one whose revenues are barely a fraction of those:  Craigslist.  In just a few short years, Craigslist has dramatically changed the way that people buy local products and services, find jobs, apartments or even dates, despite revenues estimated in the low eight figures.

Not long ago, classified advertising was the cash cow of the newspaper industry.  Whether you were looking for a job, an apartment or a used car, the newspaper was the first place most would turn.  When’s the last time you turned to a newspaper classified for anything? 

While it’s hard to pull out classified revenues from newspaper financials, one San Francisco Chronicle survey done in late 2004 estimated that Craigslist had cost Bay Area newspapers more than $50M per year in recruitment ads alone.  Nationally, the impact today must be in the billion-dollar range.

Craigslist started as an email list in 1995 by developer Craig Newmark, who shared the list among his friends in the Bay Area.  That grew virally, and today, Craigslist offers local listings in 190 cities in 35 countries around the globe, with more to come.  Craigslist serves up more than 4 billion page views per month, making it the 7th most visited English language site in the world.  It receives more than 9 million classified ads and 400,000 job listings each month.  Yet the Company employs only 22 people.

Today, whether you’re looking to hire an intern, buy a used car, rent an apartment or find an 80 year-old victrola, the first place you will look is probably Craigslist.

Initially, all the listings on Craigslist were free.  Even now, Craigslist charges only for certain categories like recruitment ads, and then only a modest fee to discourage spamming the list.  While Craigslist operates as a for-profit company, they clearly are leaving a lot of revenue on the table.  That comes from the philosophy of founder Craig Newmark, who preaches restoring a human voice to the Internet and providing an alternative to big media.

If Craiglist were to begin charging for more of their classifieds, they could easily turn into a $300-500 million company practically overnight.  In the meantime, they have developed a loyal customer base of 10 million users.  Having completely transformed the $20 Billion classifieds business, Craigslist is clearly one of the 50 Content Companies that Matter.

A few weeks ago, I posted about Waxxi, a startup offering interactive podcasts.

Their first such podcast was held live this past Saturday and featured Robert Scoble and Shel Israel.  Unfortunately, due to scheduling conflicts, I couldn't participate.

The initial reviews were pretty positive, though.  Jeremiah Owyang has a very detailed summary of the podcast content on his blog, while Frank Gruber gives a thumbs up to the process itself. 

I think Waxxi has hit on an interesting format for encouraging dialog within a community.  I will be sure to sign up for their next one and would be interested in hearing from readers who are considering using Waxxi for their own use.

UPDATE: Waxxi has posted the podcast to their site.  You can download a copy or listen interactively on the site.

Rafat Ali is reporting that TechTarget has acquired 2020software.  2020 is a software comparison and demo site, primarily targeting the SMB market.

This acquisition would complement TechTarget's current offerings, with BitPipe focused on the higher end, and 2020 for smaller businesses.

According to VentureWire, via Rafat, TechTarget paid in the "eight figure range".  VentureWire also adds that TechTarget CEO Greg Strakosch said that they would likely file for an IPO within the year.

The lead generation market continues to be a hotbed of activity, with KnowledgeStorm and TechTarget vying for the IT market.  I would anticipate seeing rollups among lead gen companies in other market segments as well.

Alacra is currently seeking a graduate or undergraduate summer intern.

The intern will be involved in several projects, including the development of a vertical wiki.
Applicants should have strong research and web skills and have an interest in content development.  This is a paid (stipend) internship.

If interested, please contact [email protected] for more details.

Now that Google Notebook is live, I thought I'd take it for a quick spin.

My initial feedback: it's rather underwhelming.

Google Notebook is designed as a bookmarking replacement - in essence it's Google's response to delicious, which of course was acquired by Yahoo last December.  Like Delicious, Google Notebook allows the user to select web pages, annotate them and store them for retrieval at a later time.  Also, like Delicious, Google Notebook can be private or shared with others.

Google notebook is a browser plugin.  From any web page you can simply right-click, then select "note this" to create an entry for that page.  From there, you simply type in your comments about that page.

True to its name, Google Notebook uses a notebook metaphor (the kind you write in, not the kind you type into) for storing these annotated sites.

Unlike Delicious, Google Notebook does not use tags.  Rather than assigning tags to the pages, you enter text about them, then you can create section headings for various topics, and organize the notes into the sections.

One benefit is that if you highlight text passages, Google Notebook will automatically grab them and paste them into your note.  This makes it more of a researcher help than strictly a bookmarking tool.  In that sense, one might look at Google Notebook as a competitor to NetSnippets rather than Delicious.

Here, in full screen mode, you can see how the notebook page looks.
The interface is clean (as you'd expect from Google) and they've got a nice ajax-based drag and drop capability to move your notes around.  The page is search-driven, so you can search your own notebooks or public notebooks for whatever you're seeking.

As with most Google Labs offerings, Google Notebook at first blush is uninspiring.  While it's a potentially useful research assistant, the lack of tagging limits its usefulness from a social software perspective.  True annotation seems to be a very niche product and it would seem that Google would much prefer to go after the wide audience that Delicious has established.  Perhaps it will get there in the next phase, as it seems pretty easy to add tags to what they've already delivered.  In the meantime, Google Notebook is a simple offering that users might find useful but is unlikely to inspire  raving fans the way Delicious has.

For more feedback on Google Notebook, take a look at TechCrunch, SearchEngineWatch and GoogleTutor.