5 Independent Movies

10 Days

2684 Views

$10,709.16 in Revenue

source: NY Times

Some blogs are trumpeting these results as evidence that people do not want to pay for online video. It is not huge revenue, but I would argue this was a successful experiment. Obviously some people are willing to pay for online video or else Google would not have generated any revenue. This experiment is just one point on the demand curve. A $3.99 price point for an independent movie resulted in an average of 264 streams per day over a 10 day period. 

Next experiments:

• Change the price point (I would try $1.99 and a .99 cent experiment
• Try a major release movie
• Experiment with days after a movie release to offer this streaming rental option
• Extend the duration to see the rate of decay of demand

This experiment was a first step in understanding the shape of the market for movie entertainment. I expect there will be an optimal mix of cinema release, online rental streams, part of a online subscription (like Netflix streaming). New knowledge is far from a failure. 

Nintendo falls into the ranks of companies who find ways to alienate fans in the name of brand protection. Nintendo has the luxury of having a brand so compelling to their fans that they want to make stories about the brand. In this case some lovers of the Zelda video game series created a movie based on the characters and gave it away for free.

I repeatedly see people protecting "ideas' to the nth degree of paranoia. Even comments such as we don't want our own employees to see ideas of other employees because they may steal them! My answer to that sentiment is simple. Follow the conversation:

• Them: "We don't want to let our employees to ideas that other employees have submitted because they may steal them?"
• Me: "Help me understand, you are afraid an employee will take an idea that you are aware of, leave the company, start a new business from scratch, resource that business, build the solution, and penetrate the market faster than your well-established, well-funded company can?"
• Them: "Yes....err no...err wait"

Nabeel Hyatt, Founder and CEO of Conduit Labs has an interesting post that examines how to predict the success of a Facebook app. Essentially, he looks at the ratio of two metrics made available by Facebook, Daily Active Users/Monthly Active Users (DAU/MAU).

I love it when people dig into the data to find answers - even when they are slightly off like this case! Nabeel's point is that a high DAU/MAU ratio predicts strong DAU growth (DAU counts is how Nabeel quantifies app success) as indicates by the high R-squared value.

Of course this is a bit of a self-fulfilling prophecy as DAU is used to compute the DAU/MAU ratio (the term of this bias I believe is called autocorrelation). Not to say this is a useless exercise. In fact, every entrepreneur should engage in a form of this exercise. The better you understand the key variables that affect your success, the easier it will be for you to devise strategies that directly impact your sucess.

In this case, I would like to see DAU or DAU/MAU regressed against app revenues. I think a person may want to incorporate a lag in those variables). The best thing you could do it collect a wealth of different metrics and use statistics to find the most important ones. I did something similar when I worked at THQ. I built a dataset that helped me identify the key factors that influence a video games revenue and unit sales success for the Kids fighter game genre. The process still can be applied to any situation, but I think it could be very valuable for web-based games where data is very abundant.

I think this would be a really interesting exercise. If anyone has a revenue-generating Facebook app out there and is willing to collect a dataset for me, I would be willing to try to identify the key determining metrics for you. No charge - I just need to know you are willing to put in the time to collect the data. Let me know in the comments.

I just got off the phone with a Charter Communications telesales agent who was trying to get me to upgrade from my high speed internet subscription to a full package of TV and phone. This was the first time they tried to call me about an upgrade, but they have religiously sent 1-2 mailing per week for the past year with the same offer. Every week I have wondered how much money do they waste sending out these mailings? I guess this strategy may work for Charter, but I was never going to upgrade.

This wasn't to say the agent did a poor job. If fact he perfectly balanced politeness with the aggressiveness needed to be a good telesales agent. I will not upgrade with Charter because the focus their marketing budget on old world marketing while ignoring the key customer touch points that make a difference in their customer relationship.

There are a number of touch points that Charter doesn't do well (see their website), but I want to focus on a missed opportunity in the customer relationship that would have cost less than all those mailings. Even though I subscribed to their High Speed internet package only as a result of their monopoly, they had a great opportunity to cultivate a relationship with me. Instead, they sent me 1-2 mailings per week and had a telesales agent call me. They treated me like an opportunity and not as regular customer.

I think of the time where my internet connection went down for 2-3 days (a big deal for my lifestyle). Charter did not contact me to apologize for the inconvenience. They didn't offer me a nominal refund for the inconvenience. Possibly they may have offered a refund to those that called in to complain, but what of us who didn't complain? Did they think we didn't notice our internet down for 2-3 days? They did send a mailing about their generous packages though!

Charter missed a true opportunity to build a relationship with their customer. A call or a letter or a email would have said we recognize the impact we have on your life and take it seriously. That would have built a connection with me. Instead they tried to pretend the outage did not happen and went on sending me their 1-2 mailings per week. What does that say about how they view me?

Maybe it's just me, but old world marketing doesn't work. I want a company who will invest marketing dollars in their touch points with me, not throw them away on mailings (Do you not realize you have my email address???). Sorry Charter, I will not be upgrading to your bundle until you upgrade your view of me as a customer.

Am I the only one who thinks this?

UPDATE: I just saw this post on the Harvard Business Review Blogs about an experience with a high end gym. Again, the gym ignores the customer experience during the relationship, but they quickly go into action once the customer cancels their membership. A little too late!

I would like to acknowledge the passing of a great entrepreneur and business community leader. Luis Villalobos passed away yesterday. I met Luis while at the Merage School where he was always generous with his time. Luis founded a number of success entrepreneurial ventures, but I will most remember him for founding the Tech Coast Angels.

“If I had asked my customers what they wanted, they’d have said a faster horse.” -Henry Ford

It seems like to today I am tackling a number of pet peeves I have been seeing spouted out in the twitterspehere. This one is a quote I repeatedly see posted by people. I believe they are trying to make the often made point that people don't know what they want. Often this is true, but people are misinterpreting this statement to believe that Innovation should not consider customers opinions. I agree customers don't know what they want. Not surprising. It's not their job. They don't spend 24/7 thinking about how to delight themselves on this specific issue. That's the innovator's job.

What customers do know is what their problems are.

Your customer may say "I want a faster horse". As an product manager should you take that a face value and give them it? Not if you want to keep your job. That statement leads into the natural question "Why do you need a faster horse?" and that is the true insight. By digging into this area you may discover that they really do not have a need for a faster anything; or you may discover that there is a genuine need to go faster. The key is that by asking those additional questions, you are truly understanding your customers wants and needs.

In the end, Henry Ford did listen to his customers. Their statement implied they wanted to go faster. A little digging probably revealed that they also liked the comfort of a wagon. "A faster wagon". Henry, knew it was near impossible to make faster horses to pull the wagon, so he needed to look for another way to solve their problem. Henry listened and the innovator in him found a remarkable solution. What are your customers problems.

Claim: To use a word broadly renders it meanless.

Some examples from the twitershpere and blogisphere: "Retailers can improve private label performance by focusing innovation on specific age segments where private label is under-developed."  (from @infores)

• Isn't the concept of private label simply being able to rapidly produce clones of other successful products?
• Instead of innovation, doesn't the author really mean "target" products in specific age segments

"Wolf Blass leading wine innovation with new green label PET bottles... 29% less GHG emissions than before..."  (from @Wine_Australia)

• In this case the innovation is agreeing to "adopt" someone else's new product (new green label PET bottles)

"Have ERPs traded innovation growth in favor of M&A growth? And what does it mean for customers?" (from @tminahan)

• Here I assume the author is referring to "new product development", but could refer to "process or business model changes".

Techdirt's Mike Masnick uses a different definition in his post, "Why Segway Failed to Reshape the World". He distinguishes innovation from inventions defining innovation as "an ongoing process of taking a product and adjusting and adapting it to the market".

• Here innovation happens after the invention; it is the "enhancing of the product".
• I wonder if  @tminahan was referring to this in the above quote?I don't think so.

"1.2 million students each year fail to graduate. ..American schools need innovation." (from @edutopia)

• What do the schools need? It sounds like a "plan" to reduce drop outs

If innovation can mean target, adopt, new product development, process or business model changes, enhancing a product or a plan are we truly communicating anything when we use the term?

Henry Blodget's post on display advertising brought me back to a post I made over a year ago. You need to go down to the 6th from last paragraph to hear my thoughts, but essentially I was criticizing the recent movement saying that Facebook display advertising was a failure because of low click-thru rates. I urged people to consider the "awareness" benefits of such advertising. Henry's post highlights some research that appears to support my assertion. Feel guilty for tooting my own horn, but it is nice to see some research examining this important area.

While the value that the Annual Revenue Growth (ARG) from New Products returns is a good indicator about the success of an innovation program, in conjunction with the other data derived in its calculation it can become a strategic tool. Here is a suggest best practice on how to use this metric.

1. Evaluate the Health of the Core - By deriving Annual Revenue Growth and  Annual Revenue Growth from New Products, you can calculate Annual Revenue Growth from Core Products (I = G - H from last post's example). This number will give you an indication of the health of the business's core product line (often the products that brought you to the dance). There are 3 categories for Core Product health:
   • Growing (>20%) - The core is still in growth mode. Like most growing things, it needs support so focus efforts on enhancing the core products.
   • Hitting Steady State (0%-20%) - Core growth is maturing and heading to a steady state level (often between 0%-5%). Now is time to begin thinking about moving into product or market adjacencies to fuel new growth.
   • Declining (<0%) - Core has begun to shrink usually as the result of some exogenous shock. If not already underway, New Product development into product or market adjacenies should be a priority. If the shock is expected to be permanent other strategies may need to be considered such as harvest/exit strategy or refocusing the core.
2. Determine Your New Product Growth Needs - Once you understand and predict how your core will grow next year, you can set a New Product Innovation Strategy. If your core is:
   • Growing - You probably don't need much revenue growth from New Products. So focus on building out your core products, but you should be slowly doing research on potential adjacent markets to enter when growth slows.
   • Steady State - Two good options exist: 1) segment your customers; and 2) move into adjacent markets or products. Segmenting your customers allows you to identify which segments are growing and find new needs and uses for your product that you haven't considered. If your core is well rounded, another strategy is to identify new adjacent markets to offer your existing products or services; or identify new products/technologies to offer your existing customers (customer  segmenting helps identify this).
   • Decline - Not only does your New Product Growth need to be strong, it needs to offset the declines from your core. Note as mentioned above, if this is viewed to be a permanent decline you will need to determine a strategic response such as harvest/exit strategy or refocusing the core.

What Should Your Target ARG from New Product Be? This will really depend on what stage your company is in. Obviously a more mature company would expect more modest growth rates compared to a new start up. So assuming we're talking about a mature company, the first question is what is the overall ARG that the company expects to get in a sustainable steady state? Chris Zook in his great book, Beyond the Core, references a US study in the 1990's that found that public companies that grew revenue by <5% saw a return to shareholders of 4.1% per year; and companies that grew between 5-10% per year, saw a return to shareholders an average of 12.1%! So let's say our target ARG is 8%. Next we ask, how do we expect our core to grow in the future. Maybe a healthy company sees a 4% Core ARG. That leaves us with 4% ARG from New Products (note there could be other sources such as acquisitions).  Now we have very visible metric targets for growth from our core and new products. If a company sees that its new product growth is falling to 2%, then it immediately knows that it has an issue with its new product development and should be doing a more thorough analysis. The ARG from New Products is a great metric for innovation because it leaves no doubt to its interpretation.