All posts by Alex Eckelberry

Competitive intel

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The competition.

It’s what drives us to create better products, and stay on top of our game.

But how do you find out the skinny on your competitors? You could hire a private detective to fish around, but most likely, they’ll find the stuff that’s publicly available anyway. Yawn.

You can do it illegally, and that’s a really bad idea.

However, there are plenty of ways to find out about a competitor, using perfectly legal methods.

Let’s start with a few tricks.

Glassdoor

Glassdoor is a bit of a cesspool, since it allows anyone to anonymously comment on their employer. And, while the intent is good, that is one of the great dangers of the platform: anyone could gang up on a company and write horrible reviews.

However, it’s still a very useful tool to get an understanding of the internal dynamics of a company. Put on a BS filter and read through the reviews and interview comments. You’ll often be surprised at how much you can learn.

Google dorks and advanced search operators

Get to really know Google’s advanced operators to turn search into a powerful intelligence tool. You can also use a number of Google dorks to find things like price lists and other interesting intelligence. It’s not necessarily that hard: I can’t tell you how many times I’ve just typed in the name of a company with the words “price list” and gotten great intel.

Surveys

I’ve done this with great success: Survey customers of competitors to get valuable information. Or, here’s a tip: you can simply create an inexpensive Google survey and get a quick NPS score on your competitors, and then track your NPS against theirs. Makes for a heck of a game.

Similarweb and Alexa

Unfortunately, you can’t find out what a competitor’s actual web traffic is without hacking into their system (again, no illegal stuff here!). However, you can get a feel as to how popular their sites are by using services like Similarweb and Alexa. And, if you have the bucks, pony up for ComScore.

Google alerts

Always set up a Google alert on a competitor to stay on top of what they’re doing.

Keep an eye on their keywords

Use tools like SpyFu or KeywordSpy to find out what keywords they’re buying.

Social

Track your competitors through Yelp, their Facebook pages, Twitter and Citysearch.

Customers and suppliers

Customers and shared suppliers are amazing sources of information. In fact, some of the most valuable intel I’ve learned is from customers. Pricing, product plans, release schedules… the works.

Watch who they’re hiring

You can learn crazy amounts about a competitor by watching who they’re hiring.

Call them

Yup, you can actually call your competitors and you’ll be surprised at how much you’ll learn. For example, call their tech support with a question, and then perhaps ask innocently “how many people do you guys have in support, anyway”. You get the picture.

Google Trends

Google Trends is useful to see what’s trending, whether in your industry, or with your competitor.

LinkedIn

LinkedIn, of course, is a weapons-grade intel system. Not only can you find who works somewhere, but you can also get a feel for employee counts, etc. Employee count alone can give you a feel for revenue.

Ex-employee interviews and hires

Ex-employees sure seem to like to talk…  ANd nothing is a better source of intel than a disgruntled former employee. This is sometimes a gray area; you don’t want to be in a position where you’re compromising the ethics of an employee’s own confidentiality. But a lot of what they will tell you is not confidential and very useful.

Trade shows

It’s lame to even write this, since everyone knows it and does it. But tradeshows and conferences are cesspools of leaked information. If you want it, chances are you can get it by just chatting away with people. Buying drinks helps.

It’s surprising that competitive “booth busting” is not done by more people.  And sometimes, your competitors will do astonishingly stupid things. Be on the lookout for these rare opportunities. For example, many years ago, I was a product manager for a disk utility. A competitor was coming out with a new version, and we were dying to know what features were in it. So I went to a trade show, and they were demonstrating the beta version at the booth. That was somewhat useful, but I really needed to (legally) obtain a copy of the product.

And then something amazing happened: Over the PA system, they announced that they were raffling off a beta version of the software. I couldn’t believe my ears. I ran to an ATM machine, took out $200 in cash and then waited. Soon, a winner of the raffle was announced. I walked up to him and bought it off of him for $200 and we had a beta copy of the company’s software. We were able to run it and find out what features were planned. Needless to say, it didn’t end well for them.

However, keep in mind the Golden Rule. Compete fairly and ethically.

But that doesn’t mean that getting out there and doing some basic reasearch won’t drive tremendous results.  You might be surprised at what you’ll discover.

Building teams with team-based budgeting

Recently, an executive coach was advising a CEO I work with on building teamwork in his company, and encouraged him to do “ra-ra” type activities (group outings, that kind of thing).

That’s meaningless.  While it’s always nice to get people together for a bit of fun, the real way to build teams is to get people working together on actual business problems.

Team-based budgeting is the method I have used for many years to perform the budget process and build teamwork, and it makes a lot more sense than what is often done.

In most companies, budgets are done by each manager turning in a budget to the CFO, the CFO puts it together for the CEO, the CEO cuts out expenses and adds additional revenue, and poof! – the budget is presented to the board.

Not really a workable process.

This brings me to the subject of team-based budgeting.

I’ll start with a story: Many years ago, I started as the president of a software company and found several things wrong with the accounting and finance functions:

– No one had responsibility for a budget.
– The VP of Sales was in a heated deadlock on commissions.
– Forecasting was done on a hope and a prayer.

At the time, the company was small — about $15 million in revenue — and so, at that size, it had largely been run on a sort of “financial dictatorship” by the major investor. Well, considering that this shareholder was dealing with a management team that didn’t really understand finance, his point of view was understandable.

However, it’s important to develop a team-oriented approach to forecasting and budgeting. By implementing this approach, I rapidly had the whole senior management team working together smoothly on the finance functions. Better yet, we were able to grow very fast, to nearly $50 million in revenue, without any outside capital. Because we responsibly controlled costs, as a team, we were able to do great things, without a lot of money.

But it really wasn’t that hard. All I did was:
– Rework the financials to make them clear and understandable.
– Make the managers responsible and accountable for their budgets.
– Implement team budgeting

Reworking the financials
Of the three financial statements required to run a business (P&L/income statement, cash flow and the balance sheet), the one that managers must have a good grasp of is the P&L. The other two can be worried over by the CEO and the CFO.

And there we run into a problem: GAAP accounting, which can muddy the scene. Revenue recognition, accruals, depreciation and amortization can make it like a company is bleeding money hand over fist, but when you really look into it, it’s actually doing just fine. Or, a company can look wildly profitable, but is a toxic mess (anyone ever heard of the old Computer Associates?). Reading a modern financial statement, especially for a software company, is a bit of an art in itself.

So first I pivoted the focus onto billings as the topline focus. Billings is what sales guys go for, what they see “on the board”. They closed a deal, and it was for $100k. That’s what they see, and that’s what motivates them, and that’s what you want them to get.

There are fine nuances to get into here, that aren’t worth cluttering up this article with. It’s different in a SaaS environment (where you typically compensate on MRR/ARR and make that your target), and yes, there are cases where you may not compensate on billings. But the bigger point is, get a number that’s real to the sales people, that they can go fight for.

So the first thing I got everyone around was the concept of one topline number. And it was the billings number. This was in direct contradiction to what the CFO had been doing earlier (bizarrely, paying commissions on recognized revenue).

Now to the expenses: there are expenses that managers have control over, and ones they don’t. They go out and buy something for $10,000, it’s $10,000. It’s not some amount amortized over a period of time.

I wanted the managers to know that if they bought something, it didn’t matter how we would book it from an accounting perspective: they bought it. Business live on cash flow, and the impact of cash decisions is vitally important for managers to understand.

So I went a step further, creating a “modified EBITDA”. Basically, I turned the P&L into a cash-based accounting system (we still maintained a separate set of standard GAAP financials for the board, investors and other external parties).

To create my modified EBITDA, I simply added back in certain capital expenditures to my EBITDA figure to get an income statement that reflected actual cash spend, making it easier for everyone to understand.

And then I got them all in room and we budgeted as a team.

Now, depending on your business, you can probably ignore the other pieces of advice here, but this last one is important.

The way you do team based budgeting is to you set the goals in advance of the meeting — a realistic target. Like: “20% operating income, 25% increase in sales.”, and so on.

You then give all the managers enough time to pull their numbers together. Each has a departmental spreadsheet for their own area.

For the sales forecasting side, I would work between the product teams and the sales teams to get our product launch dates figured out, new versions, etc. I would take the teams off-site and we would work through the product planning. (Product planning is a huge driver for revenue, and something to spend quite a bit of time on).

And then I got all of the management team in the same room. We sat with a large-screen projector, and our spreadsheet was built with links where I would have all of their files loaded at the same time. Then, we would go through every manager’s area, and they would have to account for their expenses. As we made changes to each department’s budget, the main P&L forecast was automatically updated, giving a very quick view of the impact of each little change.

Now, peer pressure is a powerful motivator. We’re all on the same team, so when the sales person says “I can’t get sales without more leads”, the marketing person is right there to answer him, and the CEO is right there to work with the team.

When I first loaded that spreadsheet, it was comical, as a first-pass budget always is. Everything was in the red, because sales people sandbag and managers ask for more money than they need. But after a marathon two or three-hour session, we started to get to reality.

The CEO is driving the process. But the CEO is letting the team work on the heavy lifting of figuring out where to get the money.

I’ve literally been in a situation where I said “not enough money for a Christmas party”. R&D and sales then began to horse-trade expenses back and forth to get the money for the Christmas party. We got our Christmas party. (I really doubt I would have killed the party, but it was the idea that counted — that we had to work out a way to cut more costs so that we could earn the luxuries.)

After one marathon session, managers are given homework, to go back and figure out ways to get the costs worked down more (or get the sales up). Department heads have individual break-out sessions with other department heads to work on the budget. And then we have another team meeting a week later.

After that, the budget is pretty much a wrap.

Getting to the target number becomes a game. And when you have a game where everyone works together, you have a team.

Key is that the managers own their budget. They are given leeway to execute on their plan, although I still had in place basic cost controls to ensure that costs were still being managed.

Pushing responsibility down into the organization is the way that company’s succeed. And team-based budgeting is the first step to correctly delegating and managing authority.

What the Kaspersky breach tells us about the state of antivirus

Yesterday, Kaspersky announced that some of its internal systems had been breached. While this may have created a sense of Schadenfreude in some parts of the security community, Kaspersky has handled the situation quite well.  Instead of other companies that have suffered a breach, Kaspersky worked straight from the crisis management playbook — full disclosure, plenty of information and a plan. Kudos.

As Graham Clulely says: “In short, it handled what could have been a corporate crisis well – and reassured customers and partners that their data was safe, and the integrity of its security products had not been compromised.”

(Although one can’t help but wonder at the timing. According to the press release, the malware was found in “early spring 2015”, but the announcement is coming on June 10th — just a few weeks away from the official start of summer…)

Kaspersky is being up-front, but they are also spinning this as a research item. And that’s okay, because it is some fascinating research. This is a very interesting new malware variant, and quite sophisticated, quite likely tied to state-sponsored activities.

But they just can’t help being Kasperskyish:

From a threat actor point of view, the decision to target a world-class security company must be quite difficult. On one hand, it almost surely means the attack will be exposed – it’s very unlikely that the attack will go unnoticed. So the targeting of security companies indicates that either they are very confident they won’t get caught, or perhaps they don’t care much if they are discovered and exposed. By targeting Kaspersky Lab, the Duqu attackers probably took a huge bet hoping they’d remain undiscovered; and lost.

(Yeah, that explains the Schadenfreude part.)

Anyway, the bigger story is the state of the antivirus detections on the day following Kaspersky’s announcement.

Considering that most antivirus vendors practice what I call “hash-whoring”, where hash detections from VirusTotal or internal scans are dumped wholesale into their databases (explaining the massive size of today’s antivirus engine), the poor detection state of this variant is surprising. (Incidentally, I’m not condemning this practice — it’s a very useful stop-gap until a detection team can make a good detection — nevertheless, it’s abused way too much, especially by poorer quality, also-ran engines.)

We know what this piece of malware looks like, because Kaspersk published the complete Indicators of Compromise (IOCs). So, we can just go to VirusTotal and check the detection status:

Vt1

Vt2

Vt4

Vt5

 

And so on.

So, just for fun, I’ve published the hashes below, hyperlinked to VirusTotal.  You can click on them as the week progresses to see the state of detection of your antivirus product.

Action loaders:

089a14f69a31ea5e9a5b375dc0c46e45
16ed790940a701c813e0943b5a27c6c1
26c48a03a5f3218b4a10f2d3d9420b97
a6dcae1c11c0d4dd146937368050f655
acbf2d1f8a419528814b2efa9284ea8b
c04724afdb6063b640499b52623f09b5
e8eaec1f021a564b82b824af1dbe6c4d
10e16e36fe459f6f2899a8cea1303f06
48fb0166c5e2248b665f480deac9f5e1
520cd9ee4395ee85ccbe073a00649602
7699d7e0c7d6b2822992ad485caacb3e
84c2e7ff26e6dd500ec007d6d5d2255e
856752482c29bd93a5c2b62ff50df2f0
85f5feeed15b75cacb63f9935331cf4e
8783ac3cc0168ebaef9c448fbe7e937f
966953034b7d7501906d8b4cd3f90f6b
a14a6fb62d7efc114b99138a80b6dc7d
a6b2ac3ee683be6fbbbab0fa12d88f73
cc68fcc0a4fab798763632f9515b3f92

Cores:

3f52ea949f2bd98f1e6ee4ea1320e80d
c7c647a14cb1b8bc141b089775130834

(And, also remember to blacklist the C&C IPs: 182.253.220.29 and 186.226.56.103.)

Is this blog post another tired rant against antivirus? Absolutely not. AV isn’t dead. It’s part of a valid belt-and-suspenders approach to security.

But, a day later, and we still see poor detection? Yeah, that part sucks.

How to Create Surveys People Won’t Hate Taking

If you know me, you know I’m a survey dork. Like, serious survey dork. I live and die by them. Testing, surveys, data.

So I was more than pleased to see Mimi An over at HubSpot take on the task of pointing out the obvious flaws in so many surveys.

It’s a good post. She doesn’t have all of the tricks, but some very useful tips. Like:

  • Make the darned thing short. Long surveys (invariably designed by committee) are a good way to get poor results.
  • Avoiding Yes/No questions.
  • Randomizing answer options to avoid “first-choice” bias
  • Correct use of matrices (pretty vital, IMHO)

And more, here.

With BlueStripe acquisition, Microsoft gives IT managers a new window on their world

Today, Microsoft announced its acquisition of BlueStripe Software. As an active board member of the company, I couldn’t be more pleased with the combination (although I will really miss working with the BlueStripe team).

BlueStripe has the mission to help IT operations teams map, monitor, and fix their distributed applications.

BlueStripe’s software, FactFinder, is a type of Application Performance Management (APM) product that is very unique, and very powerful. (The use of the APM label for BlueStripe is admittedly sloppy — it’s technically, per Gartner, Application-Aware Infrastructure Performance Monitoring, or AA-IPM. Nevertheless, the label “APM” sticks and even I can’t stop using it.)

Classic APM solutions help developers and IT managers spot and resolve problems with applications. Typically, this is done in the form of some code that is inserted into an app (kind of like a “barium trace”). This is what a company like New Relic does.

The problem with the code-centric solution is that it’s great for developers to debug their apps, but it doesn’t help IT or DevOps folks. So, the typical solution to an application problem is for enterprises to hold large “bridge” calls, where IT, DevOps, and app developers all get on long and often painful conference calls to determine where the fault lies.

FactFinder doesn’t rely on any code, and is a different type of APM. Instead of code, it relies on lightweight and intelligent agents (called “collectors”) directly installed on servers and desktop systems to monitor a broad set of applications. These agents then feed up into a map of all major applications, allowing an IT executive to immediately spot (and dig down to) where the problems are.

For example, let’s imagine an application in banking. When a person inserts their ATM card, a series of actions occur behind the simple ATM transaction, often involving a series of applications residing on various servers. And, let’s say that ATM transactions typically take under 30 seconds, but suddenly, start taking over 2 minutes. Something is wrong. It could be a failed connection, a configuration issue, bad code, DNS issues, rogue applications, mis-matched bandwidth, memory or storage — whatever. With FactFinder, the IT executive gets an immediate alert, and can visually determine where the problem is, dig down and fix it.

It’s wickedly cool stuff.

FactFinder can monitor pretty much anything. Windows, Linux, Solaris, and AIX servers, and even using containers like Docker. It can even monitor response times from other servers (mainframes, 3rd party services) that are part of an application. And, it monitors both packaged applications (SAP, PeopleSoft, Exchange, etc.) and custom-built applications.

Environments are becoming insanely complex

The problem of managing complex application environments is even more difficult because of two trends: virtualization (massively multiplying the number of servers and the complexity of the environment) and the move to the cloud.

It’s not unusual for a server to have 12, 20, 50 virtual machines — on one server. And the cloud… well, it’s not “the cloud”, it’s almost always hybrid deployments in enterprises. So you have a multiplication of complexity, because you have apps and data residing on the private cloud, and apps and data on the public cloud. You get the picture. Sucks to be an IT ops person.

And this is where FactFinder becomes intensely interesting. Because it can monitor the apps in these complex environments.

Which brings me to…

Where Microsoft fits in.

In my opinion, BlueStripe is a perfect fit for Microsoft. In fact, I can’t think of a fit more perfect.

To explain, Microsoft’s centerpiece in its systems management strategy is Systems Center Operations Manager (SCOM). SCOM provides IT managers with a total view of network operations.

FactFinder provides many advantages to SCOM environments, by discovering, managing and measuring application and platform dependencies.

IT managers can have FactFinder automatically build topology diagrams (not possible now in SCOM), map a dynamic application architecture, monitor dependencies and provide full coverage of dependency failures (you can see a 30 second demo at TechEd by Nick Burling to get a quick idea of how it integrates).

Simply stated, it “turns the light on” for IT, development and DevOps as to what is happening to with applications on their network.

FactFinder in SCOM.
FactFinder in SCOM.

In addition, BlueStripe Performance Center for Windows Azure Pack adds application management – and a single view for managing application service delivery, all tied directly into the Windows Azure Pack service management workflow.

WAP_AppMap_Expanded_withoutframe
FactFinder in Azure.

Oh, that’s cool.

Well done, BlueStripe team (and the competent banking group over at Pac Crest).

And to Microsoft: You got a good one here.

White lies to yourself about revenue may make you feel good, but the end always sucks

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Revenue: It’s what CEOs are judged by. But all too often CEOs give white lies about revenue to themselves, their staff and investors.

I’m not talking about criminal stuff. It’s just, well, not being totally honest about the state of the numbers.

Let’s look at a few that I’ve seen.

Reporting new license revenue and recurring revenue as one number.

This is so common, it’s almost a joke. I routinely talk to CEOs who say “our numbers are up”, and then I ask the question: “Is the new license revenue up?” and get the real answer.

New license revenue is what’s new. A new customer, and it is the single most important revenue number.

Recurring revenue is from customers renewing a subscription or a software maintenance plan.

Recurring revenue is driven by three things, in order of importance:

  1. product quality, price and relevance,
  2. quality of technical/customer support and
  3. renewal sales activities.

If you focus on these three key drivers, recurring revenue chugs along happily. For enterprise software companies, typically 75–90% of your customers will renew their subscription (or buy a maintenance plan). 85% is a good goal. I’ve experienced as high as 100%. But that’s an outlier, and if you have 100% renewal rates, you’re not as smart as you’re lucky. Customers do drop off in a normal world.

In consumer software companies, the number is typically lower, perhaps in the 65%–70% range.

(Of course, if you’re a pure SaaS/subscription business, you’ll focus on churn.)

The biggest mistake a sales manager can make is to confuse these two revenue sources. Recurring revenue reps should not be compensated as highly as new license reps (and they often are, because the numbers are so large). They should be compensated on a good base plan, with commission tiers or bonuses tied to the percentage of existing customers who renew their license subscription, with the total dollars booked being less important.

That’s not to minimize the revenue role of a renewal rep, as they should be compensated for aggressively selling add-on licenses, additional plans, and other revenue opportunities. The point here is to put the picture into perspective.

Focus on your new license billings as your number one priority.  Have that number as a KPI that everyone knows.

Then have a separate KPI for total recurring revenue dollars and the percentage of customers renewing.

Don’t hide poor new license billings by merging the number with recurring. That’s just lying to yourself and your investors.

How to calculate renewal revenue

Companies are all over the place in terms of how they calculate renewal revenue. And, you can play with the numbers to make yourself look better.

But again, we’re looking at an honest number to run your business. In the above link, Carbonite is a company that has a good approach.

To make it simple, keep two statistics:

Renewal Count

How many customers are up for renewal in a given period?  (a)

How many of those renewed? (b)

And you get:

b/a=renewal rate

It doesn’t matter if they renew in that month, or in a different month. One simply keeps track of the rolling average of renewal rates.

Renewal Dollars

What is the dollar value of the renewals in a given period?  (a)

What were the renewal dollars (including upsells, crossells, additional licenses, etc.) in that period (b)

And you get:

b/a=renewal dollar rate

 

The point is to separate thinking in the organization from existing customers and new customers.

Incorrectly calculated subscription revenue

Subscription-based revenue is another method that’s often incorrectly calculated, often completely innocently.

As you probably know, there are two key calculations in subscription revenue: MRR (Monthly Recurring Revenue) and ARR (Annual Recurring Revenue).

The formula for MRR is dead simple = Total # of Paying Customers  x  Average Revenue Per User.

Now, MRR/ARR metrics are commonly used in reporting, but they are not included in GAAP or other reporting schemes. But they are very important to investors, and to the management of a SaaS company.

So here are some common errors in SaaS reporting. Some of these are surpassingly common.

  • Including quarterly or annual contracts at full value in a single month. Even if someone pays you a lump-sum quarterly or annually, you still need to divide the numbers up to match the MRR figure. (I know, it seems obvious, but I’ve seen this mistake done all too often). Bookings are different than MRR.
  • Underreporting by including fees in the MRR number. Don’t under-report the number by discounting, from the MRR number, credit card charges, delinquency, etc. It will throw off the true number. Instead, break those out separately.
  • Including one-time payments. Don’t bundle in one-time payments into your MRR. These are just that: one time payments, whether NREs, or license fees, or whatever. Report them separately.
  • Including free trials. Don’t include free trails in your MRR numbers. It’s fairly idiotic, but it does happen surprisingly more than one would expect.
  • Not netting out discounts. Net out your MRR net of discounts. In other words, if a customer gets 20% off per month for prepaying, then report the number net of discounts.

(Hat tip to Profitwell — and a shout-out, as they have a great free tool for SaaS reporting.)

Under-reporting can be almost as bad as over-reporting.
Under-reporting revenue (to be “conservative”) can also really kick you in the teeth, as I’ve learned first-hand.

Just get the right number, don’t play games and be completely honest with yourself and with your team and investors. You may not be popular in the short-term, but in the long-run, you’ll be running a better business.

And that, in the end, is what counts.

The genius of Claude Hopkins, the original dude

Claude-Hopkins (1)
The original dude

Every once in a while, someone writes a blog post about the genius of Claude Hopkins. Well, since I am not feeling particularly original today, I’ll tag along and do exactly the same thing, but perhaps with a different twist. After all, one can’t talk about Hopkins enough.

Despite what Bill Gross says (the success of startups is largely timing), you can control your destiny, and it comes down to not only the right product, but the right marketing.

There are three marketing legends, that if you read their books and apply their methods, will considerably impact your chances of success: Claude Hopkins, David Ogilvy and Al Ries.

Most anybody who has worked in marketing or advertising knows of Claude Hopkins. The ones, however, who take his words to heart, are the successful ones.

Hopkins was a rock star in his day. In 1907, he earned several million a year (in today’s dollars) at Lord and Thomas. He was the genius behind many of the biggest brands, and most are still here with us today. Heck, you can blame the fact that people use toothpaste on this guy. He made it popular.

David Ogilvy famously said “Nobody should be allowed to have anything to do with advertising until he has read this book seven times. It changed the course of my life.”

Timeless
The free trial model, the freemium model, coupons, campaign tracking… so much came from Hopkins and other greats like him.

The reason? Despite what anyone thinks, what motivates people are the same factors today as they were 100 years ago. Or 2,000 years ago, for that matter. Now, obviously, tastes, technology and styles change. But the fundamental drivers of humanity are still there.

I’ll give you an example: Many years ago, I was a young product manager who had recently read some of David Ogilvy’s worksNow, if you’ve ever read Ogilvy (who came from the Hopkins school), he repeats one thing tirelessly: use plenty of copy. 

I met with our agency and they presented some design for an ad. Very light on copy, with a big headline. So, I asked the question: “Why not use more copy?”

The answer: “People don’t read these days. It’s a visual world”.

Oh really? People don’t read? Nah. They read blogs, magazine articles, trade publications, emails, Facebook posts, etc., etc. People read.

Claude Hopkins, 100 years ago, ran into the same thing. Here’s what he wrote:

Some say “Be very brief. People will read for little.” Would you say that to a salesman? With a prospect standing before him, would you confine him to any certain number of words? That would be an unthinkable handicap.

Like I said, some things never change. Once you get a person to read the headline, why not have some copy to finish off the sales message? (Now, I’m not actually in favor of the landing pages with endless, schlocky copy. Creating good landing pages and web sites with an artful mix of headlines, subheads and copy is, itself, a fine craft. But don’t worry about writing a bit. You might find that people actually read it.)

Hopkins in his own words
Let’s look at some classic Claude Hopkins quotes:

  • Advertising is salesmanship. Its principles are the principles of salesmanship…The only purpose of advertising is to make sales.
  • People don’t buy from clowns.
  • Don’t think of people in the mass. That gives you a blurred view. Think of a typical individual, man or women, who is likely to want what you sell.
  • People can be coaxed but not driven. Whatever they do they do to please themselves. The best ads ask no one to buy…The ads are based entirely on service. They offer wanted information. They site advantages to users.
  • Human nature is perpetual. In most respects it is the same today as in the time of Caesar.
  • The product itself should be its own best salesman.
  • Almost any questions can be answered, cheaply, quickly and finally, by a test campaign. That is the way to answer them, not by arguments around a table.
  • A person who desires to make an impression must stand out in some way. Being eccentric, being abnormal is not a distinction to covet. But doing admirable things in a different way gives one a great advantage.
  • Show a bright side, the happy and attractive side, and not the dark and uninviting side of things. Show beauty, not homeliness; health, not sickness. Don’t show the wrinkles you propose to remove, but the face as it will appear. Your customers know all about the wrinkles…We are attracted by sunshine, beauty, happiness, health, and success.
  • …the love of work can be cultivated, just like the love of play. The terms are interchangeable. What others call work I call play, and vice versa.
  • I know of nothing more ridiculous than gray-haired boards of directors deciding on what housewives want…We must never judge humanity by ourselves. The things we want, the things we like, may appeal to a small minority.
  • The greatest two faults in advertising lie in boasts and in selfishness. The natural instinct of a successful man is to tell what he has accomplished. He may do that to a dinner partner who cannot get away. But he cannot do that in print. Nor can he put over, at a reasonable cost, any selfish, undertaking. People will listen if you talk service to them. They will turn their backs, and always, when you seek to impress an advantage for yourself. This is important. I believe that nine-tenths of the money spent in advertising is lost because of selfish purposes blazonly presented.

Hopkins wrote My Life in Advertising and Scientific Advertising. You can pick up both, combined. Since they are both public domain, the books are readily available for download online. Ian Dewar has also put up a version of Scientific Advertising and you can also read a PDF version of My Life in Advertising.

Here are some example ads. Yes, they are dated, but in their day, they were very powerful and were behind the success of so many major brands, it’s a bit mind-blowing. And the fundamentals, again, are timeless.

Schlitz Beer
This is a famous example Hopkins used to catapult Schlitz from 5th  position in the market to #1. Before he came out with this campaign, Hopkins did an enormous amount of research, even going to brewery school to teach himself how beer is brewed. Nothing was clicking.

Then, he actually went to the Schlitz brewery, and found some amazing things: Schlitz was using water from ancient artesian wells, and going to great lengths to insure its purity.

When he asked the folks at Schlitz why they had never told anyone about these advances, they answered that “everyone in our industry does this”. But Claude realized that no one outside of the beer business knew these things. The irony is that every beer brewer advertised “purity” but, since everyone was saying it, it had zero impact on the public.

So, he simply highlighted what Schlitz was doing (again, that everyone else was doing as well).

As Hopkins says (relevant today in technology marketing), “The situation occurs in many, many lines. The maker is too close to his own product. He sees in his methods only the ordinary….That is a situation which occurs in most advertising problems. The article is not unique. It embodies no great advantages. There are few advertised products which can’t be imitated. Few who dominate a field have any exclusive advantage. They were simply the first to tell convincing facts.

 

Apple2


Palmolive

Good old Claude convinced women to wash their faces with soap before their applying makeup.

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Sunkist
Hopkins’ employer, Lord and Thomas (of Albert Lasker fame), landed the Southern California Fruit Grower’s Association account for oranges grown in California (“sunkissed”, later changed to “Sunkist”). Back then, people didn’t drink orange juice. They just ate the orange.

Homeboy Claude changed that. He marketed drinking an orange, and included a coupon for an inexpensive squeezer. Huge success. We now drink our oranges.

Thanks for the OJ, Claude!

 

Picture3.0

Van Camps beans

Do you know that before Claude got involved, people didn’t buy canned beans? They cooked them themselves. Claude changed all of that.

I started a campaign to argue against home baking….I told of the sixteen hours required to bake beans at home. I told why home baking could never make beans digestible. I pictured home-baked beans, with the crisped beans on top, the mushy beans below. I told how we selected our beans, of the soft water we used, of our stream ovens where we baked beans for hours at 245 degrees. Then I offered a free sample for comparison. The result was an enormous success.

 

But then all the competitors caught on. So, Hopkins did a campaign reminiscent of the Progressive Insurance’s successful campaign comparing their rates against others.

He told people to buy his competitor’s product. And it was wildly successful.

After a while, when others followed us, we suffered substitution. Our rivals tried to meet it by insisting on their brand. They said in effect, “Give me the money which you give to others.” And such appeals fell on deaf ears.

I came out with headlines, “Try Our Rivals, Too.” I urged people to buy the brands suggested and compare them with Van Camp’s. That appeal won over others. If we were certain enough of our advantage to invite such comparisons, people were certain enough to buy.

That’s another big point to consider. Argue anything for your own advantage, and people will resist to the limit. But seem unselfishly to consider your customers’ desires, and they will naturally flock to you.

You can google around and find other great examples of Claude Hopkins’ genius.

The key point is that a lot of companies waste money on branding and marketing that doesn’t succeed. And while print advertising is largely dead, the principles of good advertising and marketing are timeless and are ignored at one’s peril. I have certainly used them to great success myself in every company I’ve been at.

So, the next time you’re eating a breakfast of Quaker Oats, having a nice glass of orange juice, while reading the Wall Street Journal, then brushing your teeth, then driving a car with Goodyear tires, then coming home and having a Schlitz beer with baked beans, while shopping online at Sears (well, the last three were a stretch, unless you live in a, err, certain part of the country), you can give a hat tip to Claude, the original dude. Because he was the marketer behind all of these ideas and brands, and many more.

(h/t)

The pathetic decline of SourceForge

It’s no news to anyone who downloads software. Most download sites are awful. Misleading practices.  Over-indulgence in advertising.

It’s all over the board. One can barely find a good download site anymore.

The best place to find a trustworthy download is directly from the developer. And even that is fraught with peril, since many developers use, well, download sites to propagate their software.

In response, many developers are using Github to provide downloads. But Github, at least for inexperienced users, is daunting.

But the most depressing is SourceForge. Made all the more pathetic by its once-proud past, SourceForge has become a sad and pitiable site. Apparently pushed mercilessly by its parent company, Dice Holdings, to make quarterly targets, the company has lost its way and is now the butt of jokes.

As Simon Phipps points out:

Once the darling of open source, SourceForge has been eclipsed by GitHub and package managers, leaving it with a long, thin tail of (mostly consumer) software. It has used increasingly desperate measures to monetize the service through questionable advertising, SEO, and adware injectors.

Couldn’t have said it better myself.

And Google seems to agree, as I tried to download Ccleaner portable today:

Sourceforge 1298123

Sigh.

And then there’s the confusing advertising. What button do I click?

Download misleading

 

So, let’s walk through an install of FileZilla. Now, before you say “oh, FileZilla is cool, it’s the evil SourceForge”, FileZilla is getting paid for SourceForge’s bundling. Shame.

Misleading sourceforge988123

 

First, we are mislead. “An ad-supported installer” which “might provide you with an ad during the install process”.

Utter nonsense.

Oh well, then we have to get through this warning screen. Ooops!

B sourceforge 1298123

 

Anyway, we finally get to the installer and this is what you get (you are defaulted to “Quick (Recommended) which will change your default search to Yahoo). The “Internet Browser” is Chromium, defaulted to search to Yahoo, and defaulted as your primary browser. Irritating.

Filezilla misleading crap

 

Of course, Yahoo is safe, but there has been all kinds of crapware installed in the past.

And then it continues. At least you’re opted-out of this software:

A sourceforge 1298123

Whatever. The problems of SourceForge are well documented and it’s not worth getting into in more detail.

It’s enough to say: stay the hell away from this joke of a site.

Bubble-talk. It’s not us. It’s China.

Chinese_flag_(Beijing)_-_IMG_1104

Yeah, we’re in a bubble. But China’s stock market is insane right now. Perhaps 1999 insane.

From the New Yorker:

Of seventeen hundred stocks on the Shenzhen Exchange, only four have fallen this year, and more than a hundred have seen their shares rise more than five hundred per cent. The Shenzhen Index as a whole has doubled since January, and is up more than two hundred per cent in the past year.

And from the Economist:

A hotel group rebranded itself as a high-speed rail company, a fireworks maker as a peer-to-peer lender and a ceramics specialist as a clean-energy group. Their reinventions as high-tech companies appear to have less to do with the gradual rebalancing of China’s economy than with the mania sweeping its stockmarket.

 

Pets-com-sock-puppet

But perhaps the most beautiful thing of all: a pet food company trading at 221 earnings.

The problem: China’s GDP growth isn’t that hot compared to its prior spree of raping of the US economy through currency manipulation.

So… what happens if China has a crash?

It might very well be a disaster for the US.

  • The US wouldn’t sell as many treasuries (China is the largest foreign holder of US debt). I’m not sure this would have a major impact, but it wouldn’t be a good thing.
  • Less revenue for big US companies doing business in China (GM, Nike, Apple, etc.).
  • A collapse of commodity imports (copper comes to mind) which would affect our economic partners.

In the end, however, we really don’t know until it happens. But with China being a major global power, now is the time to pay attention.

 

 

How usability can make or cost you millions

At one of my last companies, we had a large contract with a cable TV retailer to sell our product over the air.

Things initially seemed to be going swimmingly well, until the buyer mentioned that our returns were “a bit high”. But “a bit high” was unnerving and I was frankly shocked that the number was where it was.

We immediately started to research the problem, and found the issue came almost entirely from usability issues.

Once fixed, our return rates plummeted and everyone was happy. Considering that this customer did millions of dollars of business with us, the impact was not insignificant.

Later, we hired a full-time UX designer and started doing lots of usability panels, and as always happens in these cases, we were embarrassed and mortified to see videos of poor new users bumbling around, trying to do something that seemed completely obvious to us. We started to make dramatic changes to the product, with significant results.

If you’ve never seen a usability study, the following two videos by Melanie Perkins, co-founder and CEO of Canva, highlight the problem. A feature that seems obvious to a developer is painful for users.

This particularly user experience came down to a “simple” action of choosing a color.

Watch the first user:

 

So…Canva’s solution was utterly simple: just change the default color from grey to red.

And something magical happens:

Pretty dramatic! As Melanie says:

This tiny tweak has saved hundreds of thousands of people from struggling with this step and boosted our user’s self-confidence in the process.

Usability: it’s a Good Thing.

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June 1st: The first and fourth ammendment

For a brief time, we have freedom from the NSA. That’s the fourth amendment part.

And today, the Supreme Court has ruled in favor of Anthony Elonis, who had previously been sentenced to a 44-month prison term after posting threatening messages on social media.

44 months for posting ugly comments.

What did he do? He posted very graphic lyrics about his wife, co-workers, a kindergarten class and law enforcement.  For this, he was fired from his job and spent three years in prison. 

C15

He claimied he was acting as Eminem or The Whitest Kids U’Know, and he made references to his “art” and first amendment speech rights as well as using smiley faces to indicate some threats were “jokes”.

He also claimed these lyrics were therapuetic and never intended harm. That “never intended to harm” bit was the lynchpin of the Supreme Court’s ruling.

Now, his wife claimed she was terrified, and I’m certain she was. However, SCOTUS looked at it from the standpoint of intent

His violation was of a federal law which outlaws the transmission of “any communication containing any threat . . . to injure the person of another.”

However, the Supreme Court made a distinction, by saying:

The question is whether the statute also requires that the defendant be aware of the threatening nature of the communication, and—if not—whether the First Amendment requires such a showing.

In short, the Supreme Court found:

  • That the lower court’s instruction that only negligence was required with respect to a communication of a threat was not sufficient to support a conviction.
  • That the law does not indicate whether the defendant must intend the threat, and has no particular requirement as to mental state; and that scientier (a legal word meaning intent to do wrong) was not necessary to be present (citing, in part, a prior bank robbery caseL “In some cases, a general requirement that a defendant act knowingly is sufficient, but where such a requirement ‘would fail to protect the innocent actor,’ the statute ‘would need to be read to require . . . specific intent.’)

In other words, if one is stupid enough to say “I’m going to kill my neighbor” but not actually mean it, then it’s not necessarily a violation of the statute in question.

Which, I think, is good. In a completely social world, people routinely say stupid things, and to have some sort of thought police determine that a statement, said in anger, should then be subject to severe penalties, is in contradiction to the original intent of the first ammendment. 

Now, do I think Elonis is an idiot for doing what he did? Of course. But I’ll still defend his right to be an ass.

The Jobs Act — not so fast

The Jobs Act has done good things to jump-start funding.

Title II, already in place, has led to a dramatic increase in crowdfunding. However, only accredited investors (i.e. rich people) can invest.

Title IV (popularly known as Reg A+), set to take place in a couple of months, opens the field to non-accredited investors (i.e. everyone else). This is what people are talking about. (There is no Title III. While Title III significantly broadens the field for startups to raise capital, it is still not finalized.)

Among some breathless enthusiasm for Title IV are some facts that aren’t broadly understood by both investors and startups.

To explain, there are two levels to Title IV:

  • Tier 1 allows companies to raise up to $20 million.
  • Title 2 allows companies to raise up to $50 million.

Tier 1 companies do not need audited financials. However, they will still need to file their offerings in every state where the securities are offered. This could cost startups tens of thousands of dollars in legal and compliance fees (if you’ve ever been through this process, you’ll know it’s really not a big deal, but it just costs money for lawyers to file the paperwork).

Tier 2 companies don’t have to register with each state, but will have the requirement to have audited financials. Now, this is where it gets tough: audited financials for a startups are about as rare as a brass monkey’s bottom. And if they do get audited financials, it is quite expensive. (In a side story, two states have filed lawsuits against the SEC over the state exemption. They want some control over the process.)

For startups, this is tough, which means the primary beneficiaries will be companies that can actually afford these fees or have audited financials. And those companies, of course, may be just what the SEC wanted in the first place: to protect the grandmothers and orphans who may lose their money in these investments (putting aside the fact that there is actually a cap on how much a non-accredited person can invest anyway, no more than 10% of their income/net worth on a deal).

So, I don’t see the funding world changing overnight with this change, although I do think that we will see some impact.

However, another side of me can’t help but worry that we have opened a pandora’s box with all of these new investment vehicles. In fact, I’m actually glad that the SEC is being so cautious. They, like me, are quite concerned about creating a funding bubble. But that horse may have already left the proverbial barn door (pardon the mixing of metaphors).