The Case for Twitter Premium Accounts

June 15, 2012

It would make a lot of sense for companies to be able to have premium accounts on Twitter.

Consider the following use case:

Many companies have multiple users interacting with their customers on Twitter. For example, Southwest Airlines ( @SouthwestAir) has several customer service folks tweeting to users and addressing user questions (eg: @SouthwestWhit). Similarly Whole Foods (@WholeFoods) has dozens of tweeters including for Cheese (@WFMCheese ), Wines (@WFMWineGuys ) and for individual locations (@WFMMetroDetroit). All of these are individual accounts, even though they work for the same company.

A better approach would be to let companies have premium ‘umbrella’ accounts with multiple handles under the umbrella account. For example, Southwest Airlines would have a master umbrella account and individual reps have ‘official’ Southwest handles under this account. This will help companies streamline their Twitter communication.

Another big benefit of such an approach is that it would address questions of whether an employee’s Twitter handle belongs to them or their company.  With corporate accounts, the handle would clearly belong to the company. Of course, employees could have their own personal handles as well separately.

An extension of the premium account concept is to let companies have their own pages/ mini-portals on Twitter, where they can engage with users in a structured manner. These mini-portals can also offer enhanced functionality such as Buy buttons, Coupon downloads or Customer Service ‘conversations  ‘.

Here’s how:

(1) Product Catalogs:

Allow companies to offer product information or product catalogs on their mini-portals/ pages.

(2) Buy/ Action button:

Having a ‘Buy’ or Action button on their premium account page will enable companies to promote products/ services to interested users and enable their users to complete transactions right away. They can also directly track user response to their messaging.

For example, companies can drive greater engagement in the following sequence:

Promoted Tweets —————> Premium pages,—————-> Product catalogs ————–>Call to Action (Buy Button/ Download coupon).

If a user clicks on “Buy” or performs the action such as say, downloading a coupon from the page, the company can measure the value of the Promoted Tweet and ultimately, the ROI on their spend.

(3) Enhanced User Engagement with Company:

Users can visit the company’s page and ask questions about the product or engage in discussions. For example on a page for Acer’s laptops, users could go and ask the Acer reps questions about the laptop specs, via 140 word tweets, of course. The Acer representatives would address user questions and concerns by tweeting back to users.

Premium accounts would also be a useful vehicle for Monetization for Twitter.


The Value of a Facebook Fan: Some Insightful Readings

February 21, 2012

In the course of doing research on Facebook’s valuation, I found some great articles and posts on the Value of a Facebook Like or Fan:

1. From the Brandbuilder blog, some of the best analysis I have seen on this subject.

Assigning an arbitrary (one might say “cookie-cutter”) value to Facebook fans in general, averaged out over the ENTIRE breadth of the business spectrum, is complete and utter bullshit.

2. Here is an argument (from Millward Brown) for how social media is not a means to building brands, but rather an end.

Social media can’t help build brands without the other ingredients that make brands strong: an effective business model, a great brand experience, clarity of positioning, and the ability to disrupt the status quo in a product category.

3. And this, a comparison between the value of Facebook and Twitter sharing from Eventbrite.

Sharing activity on Facebook equaled almost 4 times the amount of sharing on Twitter.  We attribute this to Facebook’s reach (right now there are simply more people that use Facebook than Twitter) and the fact that connections on Facebook more closely mirror real-world, personal relationships.

4. Finally, a video on calculating the ROI of a Facebook ‘Like’ by Adobe. Note that this is a promotion for Adobe’s offerings, but I found the methodology interesting.

 

Update: Here is an infographic from Minter Dial’s blog.

The short story is that there is no way to place a single value on a fan. The answer is that “it depends.” Not only are some fans worth more than others, but the way you build up engagement on your page makes the value of a fan more or less potent.

I plan to follow up with a post distilling my readings and my own ideas on assigning a value to social media ‘Fans’ or ‘Followers’.  Stay tuned!


How Can Facebook Monetize Mobile?

February 8, 2012

Facebook’s S-1 states that users are increasingly accessing it through mobile devices but the company does not yet monetize mobile. “Growth in use of Facebook through our mobile products, where we do not currently display ads, as a substitute for use on personal computers may negatively affect our revenue and financial results;” There are 425 million monthly active users (MAUs) accessing Facebook through mobile devices. See link here. 

Even though the S-1 presents this as a risk factor, this is a huge opportunity that the company must certainly be planning to address.

One big challenge withMobileis that only one ad can be shown per page. On PC based interfaces, Facebook shows several ads per page (as many as 7 ads). So the monetization potential for that single mobile ad has to be equivalent to all the 7 web based ads combined.

This means that mobile ads have to be extremely targeted and relevant to induce users to take action. Regular display or banner ads or even generic sponsored stories will not cut it. Mobile ads should be sharply targeted, and the right ad delivered at the right time.

What monetization options does Facebook have?

(1) Location based offers and ads:

Facebook can let users check-in to receive coupons and offers based on their locations. Similarly users can also receive ads and offers as they drive by a particular area. For example, if a user is on a particular street inSunnyvale, she could receive offers or ads from Coldstone Creamery in the vicinity.

(2) App usage:

Mobile devices are used extensively to reduce boredom and to pass time. Facebook can encourage users to access apps and games via its mobile device. If a user is bored they may be more open to purchasing digital goods for entertainment, or purchasing movies for view, for example, via the Warner Brothers page on Facebook.

The challenge is that users could access games and apps directly via their mobile device’s app marketplace instead of via Facebook’s app marketplace. For example a user may prefer to access the Angry Birds mobile app directly rather than Farmville through Facebook. There has to be a compelling value proposition (for eg, interaction with one’s Facebook network or apps’ unique availability only on Facebook). The user interface for accessing Facebook apps via mobile also needs to be seamless.


Twitter Monetization: Combining Offers with Advertising Would Be a Good Approach

January 16, 2012

Make User interests Explicit

Twitter’s monetization has focused on Promoted Tweets and Promoted Accounts. Promoted Tweets show up in users’ timelines as well as when users perform a Search on Twitter. But unlike regular Search, user intent is typically not readily identifiable on Twitter. For example, on Google/ Yahoo/ Bing, user intent is very explicit when the user searches on “laptop deals” or “car insurance”. But on Twitter, users often do not make commercial searches. And when users are not explicitly searching, it is hard to make guesses about their intent or interests.

On the other hand, Twitter is a natural medium for Offers and Deals. Several companies such as Walmart already use Twitter to tweet specials to their followers. But instead of waiting for users to follow specific accounts, a better approach would be to ask users themselves to state their interests and then tweet to them based on their stated interests. This combines the Advertising model with the Offers model.

 

This is how it can work:

Bottomline:

  • This approach makes users’ interests and intent explicit, providing greater value to advertisers as well as a good user experience. Since users have specified what sort of offer categories they are interested in, advertisers get ‘pre-qualified’ users.

Analyzing Groupon’s Customer Base: Can Repeat Purchasers Compensate for Customer Attrition?

November 21, 2011

Groupon’s long term viability is dependant on being able to reduce marketing expense while keeping on selling to the acquired subscriber base.

So the big question is: Will the subscriber base keep on purchasing?  

In Q3 the number of groupons purchased was almost the same as in the previous quarter (a mere 1.5% growth). The number of cumulative customers increased by 28%. And interestingly enough repeat purchase has grown by 33%.

What does this indicate?

  1. Lost customers: Since there are many new customers even though the number of groupons has not grown much, this indicates that there is a section of previous customers who did not purchase in Q3. This might be because of deal fatigue or the novelty wearing off. Or it might be that the deal mix did not suit them.
  1. New Repeat Buyers: There is a smaller section of customers who have become repeat buyers in Q3. They bought once (either in Q3 or previously) and came back for more. This is precisely the sort of customer base that will help Groupon attain profitability in the longer term without requiring marketing.
  1. Continuous repeat buyers: There is no data on the number of customers who were repeat customers in previous quarters and continued to buy. This again is a crucial segment to drive future profitability. If this number is large enough it makes a huge difference to Groupon’s economics.
  1. New Customers: There is a section of Q3 customers who had previously not purchased anything. Now these customers could come from older subscribers who never purchased anything previously, or from the latest subscribers acquired in Q3. If the deal mix did not change a whole lot in Q3, it is reasonable to guess that a lot of new customers might have come from the latest Q3 subscribers, because if the older subscribers were not interested in previous quarters’ deals, why would they suddenly get interested now? The good thing is that a healthy number of new subscribers are converting to customers. But the question is whether these customers will continue to purchase in the longer term without being marketed to – this is what will contribute to Groupon’s profitability.

The same trends are visible in Groupon’s older markets of Chicago and Boston. The number of groupons sold has actually decreased in those markets, At the same time there is a segment of new customers. This indicates that a segment of older customers has stopped purchasing. This is of concern because for the Groupon model to be viable in the future, Groupon will have to cut marketing expense which drives new customer acquisition. At that stage profitability would be dependant on continuous purchase by older subscribers and customers.

Takeaway: There is growth in repeat purchases in Q3, but there is also a loss in the customer base. The signals are therefore mixed and the S-1 doe not provide enough data with which to determine whether revenue from repeat purchasers can overcome customer attrition.


Is Groupon’s Daily Deals Business Model Viable?

November 17, 2011

Groupon’s innovative daily deals model has evoked extreme responses. Either it is regarded as the model that will unlock the potential of local businesses online, or else it has been reviled as a ponzi scheme.

Here is an attempt to take a more measured view of Groupon’s business model based on their SEC filings.

1. Groupon’s daily deals business model involves both a high Marketing expense and a high SG&A expense. This is a big barrier to profitability. Marketing expense was 55% of revenue and SG&A was 51% of revenue in the first 9 months of 2011.

Revenue numbers are lower than the Cost Structure (SG&A, Cost of Sales, Marketing cost)

2. Q3 was a comparatively low growth quarter. Major metrics such as revenues, gross billings, featured merchants and # of groupons showed lower growth rates. However given the very high growth rates in previous quarters, Q3 had to grow on a higher base.

Note that these are growth rates and not actual values. All the metrics grew in Q3, but at lower rates than before.

3. SG&A expense is a necessity for the daily deals business. Self serve has been the holy grail of the local space but a having a salesforce is important in order to locate and negotiate quality deals with the right level of discounting. Groupon mentions in its filing that it tries not to repeat merchants, and this adds to the sales cost. In Q3, Groupon has done larger deals which probably reduces the SG&A per deal, still, this expense is unlikely to reduce greatly. Additionally, Technology expense, which has not been very high (only 4% of Groupon’s employees are in technology) will have to increase in the future, because Groupon has to invest in targeting and other technology to support both subscribers and sales teams/ merchants.

4. Marketing expense has significant correlation to growth. In Q3 2011, marketing expenses were reduced to 181 M from 432 M in previous quarters (Q1+Q2 combined), presumably to get closer to break-even ahead of the IPO. Revenue growth slowed from 33% in Q2 2011 to 10% for Q3 2011. That is still a decent growth rate but a lot of growth was also driven by International segment where marketing expense was higher than in the US.

5. Groupon’s 2011 operating loss is 3% for the more ‘mature’ North America segment, compared to 22.5% for the fast growing International segment.

Takeaways:

  • Post IPO, in the immediate future, I would expect Groupon to see high growth rates, as they once again turn up marketing expense and expand internationally. This will impact profitability.
  • In the longer term, Groupon’s daily deals business has the potential to be profitable but with moderate to low growth. This makes for a decent but not terribly sexy business model.

Twitter Features I’d Love to See

October 23, 2011

(1) Preview & Open Links:

One of the primary ways people use Twitter is to share and read links. It would be useful to be able to preview links on Twitter. It would be even cooler if links could open from the same page, say in a frame on the right side of the page.

 

(2) Power Tweeters Crowd Out Others on the Timeline

Some people are extremely active tweeters while others are less frequent. Often the frequent tweeters tend to swamp one’s Timeline crowding out less frequent tweeters.

Here are 2 ways this could be handled:

  • Provide the ability to put frequent tweeters on a separate tab so that the less frequent tweeters have the opportunity to show up on the main Timeline prominently.
  • Let users temporarily filter out specific tweeters on the Timeline – and be able to add them back on the Timeline once they’ve viewed others as well.

(3) Support conversations in Timeline:

Often there’s an interesting conversation going on in Twitter but it’s hard to keep track of it because the Timeline shows tweets ‘discretely’. Of course, clicking on a tweet will show related tweets on the right frame, but it would be useful to have conversations bunched together on the main timeline. If anyone wants to follow the entire discussion, they can expand it.

(4) Allow commenting/ annotating when Retweeting.

Because:

  • Users would like to add their own opinions to RTs.
  • Sometimes people RT tweets they disagree with, and would like to indicate that they’re not endorsing the tweet.

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