Tag Archives: business model

Major Keys to Success from Snapchat (that probably only work for Snapchat)

majorkey

Snapchat has surprised me. I mislabeled the platform way back as just a method to share nude selfies (although there is definitely a market for that). They are more popular than ever, valuation is through the roof and they are totally altering the way how millennials communicate and consume content.

As a company they have been really refreshing and bold on their approach in their business. Take the following lessons with a grain of salt, as they might not be right for you:

1.Ask for (too) much
Google made advertising accessible for pretty much anyone and Facebook followed a suit. Snapchat has taken totally different angle. Its ads are expensive, so essentially available to only big advertisers (even though they have reduced their prices). For example branded custom lens costs 450,000 USD. Almost half a million of branded puking rainbow! We will talk about puking rainbows later. They also provide sparsely data about the ad performance and target audience (which might improve in the future). Essentially Snapchat is expensive because it can be expensive. What they offer is that you can be part of the party if you pay the premium. If you don´t, you will be left out. The choice is yours.

Major key to success: Set your price high, as it is easier to go down than to go up.

2. Don´t try to attract everyone
Snapchat is not for the old people; expect if you are Dj Khaled. We will talk about him later.

“I’ll be honest, I had no idea what they were talking about half the time”
– David Gaines about Snapchat training sessions (Chief Planning Officer, Maxus Global)

If you are CMO, it is likely that you are not on Snapchat. Or if you are, you don´t understand anything that is happening there. However, your kids or younger colleagues probably are and that gives you signal that your brand should probably do something there. Snapchat is the ultimate access to one of the hardest target audiences in the world: teens.

If you are not teen, the interface of Snapchat looks messy, complicated and hard-to-use. Essentially they defy all the traditional belief of user design and the users love it. Rest of us don´t understand it but that does not matter. The enigma of Snapchat has probably added to its lure. You cannot compare it to any other app. That is also the reason why they can ask premium. There is no alternative for Snapchat.

Major key to success: If your competition is selling oranges, start selling apples.

3. Embrace the irrational
If you are snapchatting like boss, you have way too much time in your hands. What the success of Snapchat has showed, teens and millennials have lots of time in their hands. And although you are complaining how busy you are, in reality you have too much time in your hands.

The biggest star of Snapchat is Dj Khaled, who has six million followers. He is something like a Paulo Coelho for millennials and his stories are celebrated throughout the Internet. His days “walking on the journey to the path of more success” are filled with eating, drinking Ciroc, jet skiing and sharing his wisdom through major keys (for example key to success is to have lots of pillows).

Whereas Facebook is introducing utility (ordering Uber etc.) to Messenger, the hit function of Snapchat is filter that makes you puking rainbows. The success of Snapchat has prompted Facebook to acquire Masquerade. Its hit function is the ability to switch selfies. And yes, Facebook tried to buy Snapchat back in the day with three billion. Everyone thought Snapchat was crazy to decline the offer. Now they are valued for 16 billion.

pukingrainbows

Although Internet has transformed our life in many ways, you should never underestimate the irrational and random aspect of life. Our attention span is short and that short span is increasingly filled with puking rainbows and major keys to success.

Major key to success: People will favor mindless entertainment against thoughtful utility. Always.

Could you apply some of these lessons in your own business? Maybe, if you are attracting millennials. The challenge with certain successful businesses (that Snapchat is not yet even is, only with high valuation) is that their competitive advantage is hard to be duplicated. Truly phenomenal firms go against the grain and pretty much ignore what other competitors are doing.

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Everything I Have Learned From Business, I Have Learned From Wu-Tang Clan

The most duplicated, anticipated, validated
Urban legends in the books with the ones who made it
Highly celebrated, everything was work related
Current top 40 got the Wu deep in all their business
20 years Killa Bees, yeah, we hold the pennant
Monumental stance on the cover with my co-defendants
Drop her sentence, in remembrance
Construct these jewels so they can live through my descendants
-U-God (A Ruckus in B Minor)

As some of readers of this blog might know, I have always been quite deeply involved in hiphop. Although I don´t rhyme or deejay as much anymore, I still collect records and try to follow latest music as closely as possible. Recently I was asked to write a story about Wu-Tang Clan for the biggest Finnish music magazine Rumba. If you are Finnish reader, I recommend reading it.

Wu-Tang Clan has been one of the most influential bands for me and they shaped my teenage years profoundly. What is remarkable of Wu-Tang Clan, that they were not only able to do classic albums, they build a successful business imperium as well. Regardless of your personal preference regarding hip-hop, there is quite a lot to learn from Wu-Tang Clan:

1.You Need A Good Logo
wutang

Wu-Tang Logo is legendary. The basic version with black & yellow colorway shines like Batman pattern at night. The logo is also flexible and works in different shapes, colors and adaptations.

2. You have to have a strong leader
rza

The musical peak of Wu-Tang Clan is still their debut album. That was also the time, when their leadership was most firmly at the hands of one person: RZA. He produced the album and fierce members of Wu-Tang were freestyling against each other in studio to secure a slot on the album. In later years, the egos of certain members of the group have gotten bigger and there has been more turmoil regarding the artistic direction. Unfortunately the democracy has not necessarily been that successful for them artistically.

3. Do your own thing

Wu-Tang Clan borrowed its subject matter from old Kung-Fu movies and the sounds were lifted from dusty soul albums. That was totally unique at that time. It was not tested in focus groups, did not have market research behind or was not anything really that was ever done before. Quite often you cannot predict what people want, you just do something you believe and hope for the best.

4. Nurture your talent
“We reinvented the way hip hop was structured, and what I mean is, you have a group signed to a label, yet the infrastructure of our deal was like anyone else’s. We still could negotiate with any label we wanted, like Meth went with Def Jam, Rae stayed with Loud, Ghost went with Sony, GZA went with Geffen Records, feel me? And all these labels still put “Razor Sharp Records” on the credits. Wu Tang was a financial movement”
RZA

Wu-Tang Clan as a band has sold 6.5 million albums in US. Overall they have sold 40 million albums worldwide. That number includes the individual solo albums. What was a strike of genius from RZA, was that every member of the group was able to get their own record deals from another record label. This enabled that almost every major record label had at least one Wu-Tang artist on their roster. Solo albums might have diverted the attention from the group effort, but from individual artists it was great. Especially in the beginning the sales figures were outstanding for the each individual Wu-Tang solo album as well.

5. Expand

Wu-Tang Clan was not only about music. It was about merchandise (Wu-Wear), tours, movies and even video games. The business part was always totally integrated to the music as well. Above song is called Wu-Wear: A Garment Reneissance and it is a legitimate song, but at the same time you can also view it as a blatant advertising. Wu-Tang Clan never sold out, they sold in.

6. But Don´t Expand Too Much

At some point, there was new album coming from random Wu-affiliate almost every month. This was the time before streaming, online mixtapes or even well-developed piracy, so if you wanted the records you had to buy them. Naturally the quality was not always that good and there was definitely certain Wu-fatigue at the end of the century. For example, the video below features “the youngest” member of Wu Shyheim. That song in question was probably as good as it gets, but generally no one really remembers him or any other of those loosely affiliated Wu-wannabes. Already in 1994 there was over 300 Wu-Tang affiliates.

Licensing business is the best business there is, as you it is essentially opportunity to print money. You should not license your brand to anyone, as you want retain some scarcity and appeal of your brand. Stamp of Wu-Tang Clan was commoditized at the turn of the century, but lately they have tried to regain some exclusivity. Maybe it is too late already?

7. Keep Innovating

This December Wu-Tang Clan released their new studio album “A Better Tomorrow” (which was also distributed as a bluetooth speaker). That is no the whole story though, there is also album called “Once Upon Time in Shaolin”, but there is one catch. There is only one of them in existence. Apparently someone has already offered 5 million of it as well. The music business is in ruins, but at least these hiphop-veterans keep on trying.

If you are interested more about hiphop and business, I recommend reading “The Big Payback: The History of The Business of Hip-Hop”, a brilliant book by Dan Charnas. It has great coverage of Wu-Tang Clan as well. Besides that I also recommend listening to Wu-Tang Clan regularly. It is good for you.

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Could You Sell Everything with Subscription Business Model?

There has been a surge of subscription-based businesses lately. I am not only talking about subscription entertainment services like Netflix, Hulu or Spotify. There has been also surge in subscription models both in mundane physical (Dollar Shave Club) and in high-interest software (Adobe Creative Cloud).

Naturally the model is not new, newspaper subscriptions have been around for almost 300 years. You could also view library institution as some kind of a precursor to Spotify and other entertainment subscription services. You “subscribe” by paying taxes (in Finland), or by paying nominal fee (in Singapore).  Digital has enabled more smoother service and also more innovative business models (Birchbox). In catalog-era Birchbox model would not have been feasible, but thanks to Internet you can convert people more easily from receiving the samples to buying the actual products online.

The upside for the companies with subscription model is two-folded, firstly lifetime-customer-value will likely be higher and the business becomes more predictable. For consumer the main benefit is of course the convenience. You are getting new socks every month, they are invoiced automatically and you do not run out of socks.

“All the evidence suggests that consumers love subscription content models — it’s the original model of magazines and newspapers and cable, and now it’s the power behind Netflix.”
James McQuavey (Forrester)

Subscription model is not right approach for every company, but might be something to consider. Whether you are working in product or service, it might be interesting addition to your portfolio or differentiator against competitors. Some considerations I have noticed based on subscription based models:

1. It has to be habitual usage for products
Tie-a-month works for snappy-dressed businessman but is not necessarily appealing to a person, who puts on the tie only to weddings and funerals. Usually the cycle is monthly, but could subscription model work with longer breaks? Your computer would be updated yearly? Your car would be updated every second year? Maybe not.
Interesting examples:
Miru (Monthly subscription to contact lenses)
French Cellar (Monthly subscription to French wines in Singapore)
The main challenge with product subscriptions is that you end up with lots of stuff. For many people that is not necessarily a problem, but as people. That is why I think there is definitely some kind of opportunity with combined subscription & swapping/recycling service (Such as Swapstyle or Boxcycle). It is definitely route to explore.

2. Subscribed Service is about access you value
Actually with Spotify you are not really paying for ability to listen to the music you are paying for the access to the music. You might not listen to music that much, but you want to pay for the access to that Barry White song on just the right moment. This is especially easy to see with Priority Pass. The knowledge that you could go to lounge in Airport makes already your travelling more enjoyable, whether you entertain that access or not.
Interesting examples (besides the abovementioned):
Ordergroove: They actually create subscription model platforms for their clients. I am not sure if they have some kind of subscription based compensation system build in their billings, but it would make sense.
One opportunity comes to mind with services. I like to go to different culture events, but the information for those comes many times too sporadically. You might notice interesting exhibition when it is already over. You have to search for the info from different sources, which takes time. What if you could have subscription-based culture package? You would select your level of commitment: from light once-a-month to heavy-user once-a-week. Then you would get access to an event on a fixed date. The model could also have range from just recommendation to total turnkey solution with tickets and transportation. That would be also at least worth an exploration.

Could you change your business to subscription model?

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Is Facebook Just a Bubble?

Facebook stock hit the new low last Thursday after Q2 results were revealed. Also closely linked to Facebook, game-maker Zynga has lost over 40% of its value. These stock falls have raised feelings of déjà vu  in investors of the merry days of the dot-com buble. Are we facing the sequel: Social-Media Bubble-Revenge of Stock Plummet?
I believe not, based on the following reasons:

What separates Facebook from the failed IT-bubble companies?

1. People: With the expection of the Great China Firewall, Facebook has conquered the world. Over 900 million users would make it the third biggest country in the world. Numbers are great, but over 500 million active users also prove that Facebook has become much more. It is incremental part of the behavior of the people and increasing number of people have developed Facebook a daily (even hourly or constant) habit. And we all know how hard the sticky habits are to break. Also we from the industry are naturally calculating Facebook profits all the time, but average user could not care about less how Facebook ad sales are going. Of course on the long run the financial performance and user satisfaction should be inseparable, but it is easier to tweak on your business model when you have the people already using your network than other way around.
2. Profits: Despite making loss in the latest quarter, the revenues of Facebook actually beat the industry estimates. Also Facebook has already been profitable many quarters before. This is a proof that their business model works, at least to some extend. That could be hardly said from many other failed Internet-companies.
3. Potential: Google has struggled with social: whether it is Google+ or making YouTube profitable. Apple has had Midas touch in everything… expect social. That is why they allegedly have talks with Twitter. Facebook has been the only company to really capitalize and succeed with social. This has made it as one of the key players in the battle of Internet domination (other participants in the ring: Apple, Google & Amazon).

So comparisons with the high-flying and crash-landing dotcom rockets to the new big blue are unjust. They pretty much had only potential, but neither the users nor the viable business model. Facebook is not a bubble, but that does not mean that it does not have certain serious challenges. The future success of Facebook lies in how it can solve the following issues:

1. Advertising revolution: The advertising model of Facebook is based on really traditional online media sales and the effectiveness has been questionable. Sometimes it feels that only drunk people click on the Facebook ads. The new ad units have been disappointing at best and almost disastrous at worst (ie. Facebook deals). Facebook has to find a way to get people to see and engage with ads when and where they want to actually see them. Google cracked this and it has been the core reason for its success. Until now Facebook has just poorly emulated Google with a mix of traditional display, with average results.
2. Going beyond advertising: The information of Facebook 900+ million users is a goldmine. There just should be a way to utilize it better. Currently the revenues beyond ad sales have been quite modest. This also raises the controversial question which Facebook has actively been avoiding. Could users pay for Facebook? And how much would they pay for it and for what elements? There is thin line between the effective utilization of user data and the utter exploitation of it. If you do the latter, the deliquate trust between the service and users has been ruined forever.
3. Mobile: Future of Internet is the Mobile. And Facebook damn well knows it, with over 500+ million mobile users. As smartphone will be the computer of the new generation, it needs more innovative and effective mobile solutions than just sponsored stories in mobile (although they have been performing above average). The rumoured Facebook phone is step to the right direction, but just one of the first steps into the mobile world.

“Facebook is not a bubble, but it has not reached its full potential either”

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Professional Madness

What separates advertising industry from every other business?

We are not duplicating our previous successes.Instead of consulting company who finds a good way to work around certain problem and then duplicates it to the other clients as many times as possible. The business model is that the every new iteration of the same project requires much less working resources, but the selling value is quite the same.

Like John Hegarty said, we do not have a warehouse full of great ads. We start from the scratch every single time.Your past successes only prove that you have had success before. It is not an indicator of the future success.

That is why you seldom get bored in a good advertising agency. Every project is a completely new challenge and you are trying to come up with something completely new. It is challenging and rewarding. It is also one of the reasons why even the best agencies do not hit home runs every single time. Coming up with a typical solution is similar as failure.

From traditional business perspective it is complete madness, of course.

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What is Stand-up Strategy?

First of all, I am quite sure that I have not come with the term myself. I must have heard it somewhere. Do not remember whom, so I just stole it as a name for my blog. If you are offended, then poor luck. This is advertising after all.

Stand-up strategy does not mean that it is necessarily funny, although you have to have certain kind of humor to be in this business.

Instead for me stand-up strategy is about these five things:

1. Standing up instead of sitting down.

Marketing strategists and planners have got themselves in trap.

We, as a profession, have been on a road to just become poor man´s management consultants. We have tried to complicate things, instead of simplifying them. We have estimated our value of the number of slides we have made or how thorough creative brief we have done. Those things do not matter.Only thing that matters is the quality of the work and the bottom line of the company.

We have to get out from the computer to meet the people, find the insights and understand the behavior of the people who might someday be the customers.

So get of your seat and start doing things.

2. Intuition and point-of-view is what separates you from others.

Google has replaced the average planners.

There was a time when information was scarce and planner could make himself worthwhile by just having the access to information. Those days are long gone. Information is abundant and nearly everyone has the access to the same information channels.

That is why the Planner has to stand up and tell also what he feels and what is his point-of-view.  Not saying that there is a shortcut for digesting all the information. We have to do our homework more than ever.

Read blogs, magazines, books.Watch movies, tv & documentaries. Talk with colleagues, peers, consumers & influenceres.

But those are just starting point. Having the information is only about competitiveness of today´s planner. Competitive advantage comes from your point-of-view. That is the biggest asset you have and you have to cultivate it.

After careful evaluation of all the information & data, act on your gut-feeling.

3. Planning is translating business to creativity.

Planning is a service function. You provide the springboard for creatives for the creative leap. You help account executives to sell more. Only thing tangible what is left from our work is well-performing company financially and creatively. People can live with incomplete creative brief, but they cannot leave with incomplete creative product.

Good planner is a bipolar person. He gots kicks out of creativity. He also gots kick out the business side of things. Usually he has had a hand on both of these crafts. Planning is the most rewarding but the least-respected craft in advertising. Are you ready to take on the task?

Do not trust planner who has not sold a project or not done an ad. 

4. Combining insight & behavior is the key to the success.

How many fresh new insights have there been in beer category lately?

It is still crucial to find the soul of the brand and go as deep to the customer´s head as possible. However, you cannot just push your message nowadays and hope to spark some kind of emotion. You have to lure your brand to everyday life of the people. I do not understand the separation between traditional and digital planners. If planner does not understand digital channels nowadays, he or she should be out of job. And same goes to otherwise, knowing all the latest social media channels is worthless if you do not have the knowledge of the good old art of persuasion. Even though technology has evolved we as a people are driven by quite simple things. Such things as sex, greed & jealousy.

You have to know how customer feels and how he behaves.

5.We have to reinvent this whole ad agency stuff.

I hate silos. That is why this whole departmental thinking of account-creative-planning is quite absurd for me. Our business is quite simple if you think about. We are on the quest of finding the emotional connection of the brand and consumer, which on the long run will concretize in the cash register.

Lee Clow put it great:

“We’re supposed to be a creative business, but I think we have been probably the least creative industry in the history of the world in terms of figuring out how to get paid.”

We have to think about deeper how we operate and how we make profit in the future. The collaborator who works closest with the brand, will be succeeding in the future. Will it be an advertising agency is left to be seen?

Learn the history, to know all the rules you are going to break.

These are my rules and if you do not like them I have some others as well.

From this standpoint I will be writing my observation from the industry and the future of planning and advertising as well. Welcome aboard.

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