Tuesday, August 26, 2008

Facebook Ads...not so great.

Some of you have emailed me about the CoNotes Facebook Ads that you have seen. I'm impressed that you have even seen them given the atrocious click-through rate that I have been getting. I am going to assume the only reason my friends have actually seen the ads is because I have emailed them about 50 times about CoNotes. So they are pretty aware of my logo and can recognize it at a quick glance.

I have been running ads for a few weeks now, and below charts the CTR data for the past 2 weeks. I ran the exact same ad with different university targets to see if I could detect any differences in market segments according to which university a person went to. The results were pretty inconclusive as you can see.

Read this document on Scribd: Facebook Ad Report

I had a theory that there was an underserved recruiting market at schools not typically targeted by startups. Therefore, I was expecting to see higher click-through rates at the liberal arts and top non-Ivy schools. While the average CTR of liberal arts schools was the highest, I can't really make any statements as of yet. I think I will really have to wait for spring to come around to really make any conclusions -- when college students tend to make their employment decisions. Running the ad in the summer time probably hit the alumni at those schools, which is also another interesting group to study.

Nevertheless, despite any trends that are there or aren't there, the CTRs are horrible. The highest CTR I received from ANY segment was 0.2%. Social networks are known to average about 0.1%, so my results confirmed those results. It's well documented that the users of social networks are not in the right mentality when looking at ads. They are there to find out what is going on within their "social graph" and to find some entertainment through social apps. This is much different from the transactional mentality a user has when he/she searches for "digital camera" on Google.

On the positive side, the leads that Facebook does send me (note: this is in the single digits per day) are quality leads. So the targeting functionality is pretty effective. And I'm happy that I can target ads to very specific self-defined interests of users and their school affiliation.

But here is my advice to Facebook. If you are going to build out an advertising platform, you really need to target it to the usage pattern of your users. So what do I mean by that? Well let's think about the main reasons people use Facebook:
  1. To find out about people in their network (in their network = friends or just people "in their network")
  2. To share their experiences with people in their network
  3. To spend time on social activities (not necesarily in their network)
Given these 3 main usage patterns, Facebook's advertising platform should enable different kinds of ads.

For usage pattern 1, self-expression advertising is the most logical fit. People self-affiliate themselves with brands and products. You have Apple fan-boys, Audi tuners, and Jimmy Choo shoe lovers (I'm not totally sure why I know about Jimmy Choo). Why not let companies advertise through these people? It could be a mutually beneficial relationship where brands pick specific people they want to advertise their brand through, and those people are compensated because of the special role they play in their social network (e.g. "mavens" or "salespeople" as Malcolm Gladwell would describe them). Compensation could be money, but even better is probably special privileges to products from the company. Brand companies are very concerned about diluting their brand value, so they want to make sure the right people are promoting their brand (e.g. Kobe lost a lot of endorsement deals after his rape allegations). So to enable such a advertising platform, Facebook would need to build a mechanism for advertisers to find which users to advertise through.

Usage pattern 2 lends itself to more of a transactional advertising model. People often post pictures of food from a restaurant they ate at or write a post about the hotel they stayed at. These are all opportunities to enable transactional commerce. WOM advertising is strong, so why not enable advertisers to take advantage of the best WOM advertising -- through your friends. Imagine that your friend took a picture of an awesome slice of prime rib from Lawry's. If I hadn't eaten at Lawry's, I would either want to save it to a list of "places I want to try" or maybe even make a reservation.

Usage pattern 3 is pretty hard to create a specific advertising platform for. But it doesn't really matter, as this type of usage is actually enabled by 3rd party Facebook apps. Facebook app developers currently can put their own ads on their apps, but it would be helpful as a developer if Facebook enabled ads through their own API. Basically Facebook would create an inventory of ads that developers could tap into and place on their own apps. Depending on the nature of the app, developers could select the best types of advertisements.

The difficult thing about some of my suggestions are that they would be changes in behavior for advertisers. Advertisers like buying advertising products with defined standards and specs. However Facebook has an opportunity to really shape social network advertising if they build out the right advertising platform.

So that's it. Do I really have any evidence to say this would be much better than the current Facebook Ads or their even worse Beacon product? Not really. But I'm pretty sure it is a step forward.

Sunday, August 24, 2008

Which has a better business model: YouTube or Hulu?

There has been some conversation picking up in the past year about the online video advertising business model. Ad rates are rising, and clear distinctions in ad rates between user-generated videos and professional-content videos have emerged. Hulu is now able to command 2-3x higher ad rates as YouTube. For this reason, some people are saying that Hulu is a much better business than YouTube.

Yet I think people aren't really looking at the correct metric when comparing YouTube and Hulu's business potential. People are comparing views, ad rates, and engagement. I argue that the most compelling metric should be Revenue $ per GB. GBs are the driving variable cost units in the online video business (bandwidth, storage, and processing). Therefore looking at the return per GB makes a lot of sense.

Read this document on Scribd: Which is a better business: YouTube or Hulu?

Breaking down the #s, it is clear that YouTube has a much better business model. Despite the 3x higher ad rate for professional content, YouTube is able to generate 3x as much revenue per GB because the average YouTube video is 1/10th the length of Hulu videos, and YouTube videos are encoded in a lower-quality bitrate.

These #s may change if YouTube removes its video upload size restriction or increases its encoding bitrate. It is unlikely the upload size restriction will be removed by much, but it is likely that the encoding bitrate will increase as consumers gain access to HD cameras.

Nevertheless, unless professional content ad rates end up 9x greater than user generated ad rates, YouTube will continue to have the better business model.

Friday, August 22, 2008

I’m Brian Jordan Bronson, of the Darien Connecticut Bronsons

Stuff like this is always better when it's true. It's also a great follow up to my previous post.


From: Brian Jordon Bronson
Date: Sat, Aug 16, 2008 at 8:05 AM
Subject: Hello, Stanford!

Dear Future Classmates,

I can’t believe we’re all going to Stanford!

Please don’t be alarmed by the mass email, I do it a lot (LOLz!). This is just to introduce myself, since being Round 3 I missed most of you at the welcoming receptions. I’m Brian Jordan Bronson, of the Darien Connecticut Bronsons.

As all of you probably found it very difficult as well, choosing between Stanford, Harvard, Columbia, Wharton, Tuck and Kellogg gave me a lot to think about. Luckily we all made the right choice! The past chunk of years, I worked in private equity, specifically LBO (leveraged buyouts). It all became kind of boring, and I started managing my family’s various funds and investments in my free time... when that all became second nature I decided there must be something else out there and chose to get an MBA. I really want to be challenged.

Stanford advised me to sign up for the facebook group, but I’ll let you all know now that I am new to this facebook thing so please don’t judge my lack of friends... I promise I have many friends from school and from my summer homes. What does poking do? Anyway, please do friend me as I don’t want to miss out on any cocktail or dinner parties.

And, I will admit that I recently broke up with my longtime girlfriend.
Yes, I am single, ladies.

Also, does anybody here do community service? Since I’ll be new to the Bay Area, I wanted to find out where I should best go to do my part in helping those not nearly as fortunate as I am. Specifically, I am interested in volunteering at a soup kitchen, or reading to sick children at a hospital, or maybe cleaning up trash in the dirtiest neighborhood. Stuff like that.

If anyone else summers in East Hampton, please let me know... I’ll be here until Labor Day, call me so we can meet up for a Mojito. There are five or six spare rooms in my house for guests, too, if anyone wants to make the trip out here.

See you all in a few weeks!


BJ (“The Beejster”)

PS—I didn’t get into Schwab, but all that means is we’ll be partying at my off campus apartment 24-7... I’m calling it “The Fortress of Soulitude.”


Brian Jordan Bronson, II
Darien, CT

Universities with hidden talent

Cross post from CoNotes blog: http://www.conotes.com/blog/universities-with-hidden-talent

In the recruiting world, there is so much subjective opinion that it is very difficult to decide if Candidate A is better than Candidate B. That is why brand name universities and companies carry so much weight on resumes.

What ends up happening, though, is that every startup looks to hire some undergrad engineers from Stanford. They all send an email out over various Stanford listservs, hoping for a hit. Sometimes you’ll get a hit, but a lot of times you are just another fish in the sea of startups recruiting at Stanford. And while students at Stanford are great, there are tiers of students. Some startups are inherently going to grab the top tier students, and some the 2nd tier…but the question is whether it’s worth going for the lower tier students or whether you should really start spending time searching for hidden talent at other schools?

So I wanted to see if there was some way to prove there was talent at lesser known schools. The tough part is finding a common, easily-available metric for “talent” at different universities. I couldn’t come up with anything good, so I settled on what data I could find easily—SAT scores at different universities. Before any of you jump on me for using SAT scores as a proxy for qualified candidates for a startup, I ask that you help find me a better metric that can serve as a proxy for such a purpose.

Given that caveat, I really just want to show that there are some non-brand name universities with just as much talent as brand name universities. I also wanted to narrow down the scope a little since a large number of entry positions at startups are engineering related. So I used US News’ list of top undergraduate engineering schools. The names most people would expect are on there (Stanford, MIT, Berkeley), as well as some other schools less well known for their engineering programs (Michigan, Cornell).
  1. Massachusetts Institute of Technology
  2. Stanford University
  3. University of California—Berkeley
  4. California Institute of Technology
  5. Georgia Institute of Technology
  6. University of Illinois—Urbana-Champaign
  7. University of Michigan—Ann Arbor
  8. Cornell University
  9. Carnegie Mellon University
  10. Purdue University—West Lafayette
More surprising were the schools on a second list for universities without doctorate programs.
  1. Rose-Hulman Institute of Technology
  2. Harvey Mudd College
  3. Cooper Union
  4. Cal Poly—San Luis Obispo
  5. United States Military Academy
I personally know of these 5 schools because of friends that attended each school, but I doubt a lot of people know that these schools have some great undergraduate engineering programs.

After gathering SAT data on these schools, I then ranked them by percentage of the student body with SAT scores above 1500.
  1. California Institute of Technology
  2. Massachusetts Institute of Technology
  3. Stanford University
  4. Harvey Mudd College
  5. Cornell University
  6. Carnegie Mellon University
  7. Cooper Union
  8. University of California—Berkeley
  9. University of Michigan—Ann Arbor
  10. University of Illinois—Urbana-Champaign
  11. Georgia Institute of Technology
  12. United States Military Academy
  13. Rose-Hulman Institute of Technology
  14. Purdue University—West Lafayette
  15. Cal Poly—San Luis Obispo
(Scribd doc with more data at end of the post or link to doc here.)

What stood out to me were 3 specific schools: Harvey Mudd, Cornell and Cooper Union. Harvey Mudd at 32% of their school with SAT scores above 1500 is pretty much neck-and-neck with Stanford. And all 3 have higher percentages than Berkeley and Illinois, two schools with much better known engineering schools.

Now if you want to then look at universities in terms of absolute #s of students with SAT scores above 1500, you get this ranking:
  1. University of California—Berkeley
  2. University of Illinois—Urbana-Champaign
  3. Cornell University
  4. University of Michigan—Ann Arbor
  5. Stanford University
  6. Massachusetts Institute of Technology
  7. Carnegie Mellon University
  8. Georgia Institute of Technology
  9. Purdue University—West Lafayette
  10. California Institute of Technology
  11. Cal Poly—San Luis Obispo
  12. United States Military Academy
  13. Harvey Mudd College
  14. Cooper Union
  15. Rose-Hulman Institute of Technology
This ranking only reinforces Cornell’s standing as a great place for startups to recruit. With just as many undergrads scoring 1500 or above as Illinois, and more than Stanford or MIT, it seems logical to at least make a small effort to reach out to Cornell engineering students.

At the same time, these are the #s that really hurt schools like Harvey Mudd and Cooper Union because companies feel like there aren’t enough qualified applicants in absolute terms at the schools—despite the high percentage of very smart students. But both these schools are in very convenient metropolitan areas (Harvey Mudd is in LA and Cooper Union is in NYC), so the incremental cost is not that high.

While I want to emphasize again that SAT scores are not a great proxy for talented people, it does indicate that there are some schools with hidden talent pools that startups really should be targeting. And moreover, they might want to spend more time at these other schools than some of their current target schools.

Read this document on Scribd: Universities with hidden engineering talent

Wednesday, August 20, 2008

Olympics and gaming...

I have to say that the Olympics are the biggest distraction to come around since Facebook. I mean, how can you NOT follow the drama? Michael Phelps, the Redeem Team, Usain Bolt, let alone the whole side story of human rights, pollution, and underage gymnasts in China?

What is amazing about the Olympics is that they epitomize competition. It isn't necessarily the best gauge of who is best, but it is the best competition in the world. In this competition, you have the world's best athletes all together in one place, showcasing their abilities for the world to watch.

I cannot think of any other venue that attracts the world's best talent and have the entire world watching at the same time. The World Cup might be the next closest thing, but soccer is just one sport.

There is something rare about athletic competition that brings people together. No math competition (despite the dreams of Math Counts competitors and their math teachers) would bring such a huge drawing. I think the factor that comes into play is how easily comprehensible every sport is. You could distill every competition into an easily understandable form -- fastest time, most # of points, best form. And even more important, every observer can easily be a judge of the competition. Every observer can make their own call about if a punch was landed, a landing was stuck, or the finish line crossed. Right or wrong, everyone can become involved with sports. Once you take away the simplicity of sports or the competitive nature of sports, people stop paying attention.

These same factors are the driving force behind the success of American Idol, Project Runway, and my current favorite -- America's Best Dance Crew.

Where am I going with this post? I'm not really sure...I think I'm blabbering and on some tangent now.

But the Olympic stage reminds me of the trend in casual gaming. For casual games to explode, they really need to distill the game down to an easily understandable form. More importantly, they also need to have a competitive factor that motivates people to stay involved. Easy for me to say...hard for you to do. That's why I'll just stick to what I know and watch Usain Bolt demolish other sprinters.

Saturday, August 2, 2008

Find your dance!

So I came across this video from Surya's blog and for some reason just couldn't stop smiling.

Where the Hell is Matt? (2008) from Matthew Harding on Vimeo.

It is an awesome video and I thought about why I liked it so much. What comes through is the human desire to connect with one another at a very simple level. I mean here is a guy doing a simple jig in the corners of the world, and people of all cultures, languages, and countries join in. And not only are they joining in, they are LOVING IT!

I think we all want to be Matt. We want to cut through the bull-crap of politics, stereotypes, and whatever. We want to be able to connect with people everywhere...we just have to figure out our own worldly "dance." For some, it might be their laugh, and others their smile. I'm not really sure what mine is, but this video has made me think about it. I'll let you know if I have figured it out, but you might know better than me what my own dance is.

Oh yeah...and the best clip of the bunch has to be the Papa Nui Guinea tribesmen. That is just awesome.