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Wednesday, March 31st, 2010

How To Innovate: 5 Tips From The Top Innovators

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I was fascinated by a recent Harvard Business Review (HBR) article on how to innovate (an abstract is here with the option to purchase).

They researched such innovators as Apple’s Steve Jobs, Amazon’s Jeff Bezos, eBay’s Pierre Omidyar and Meg Whitman, Intuit’s Scott Cook and Proctor & Gamble’s A.G. Lafley.

Their key finding was that innovative entrepreneurs (who are also CEOs) spend 50% more time on five “discovery activities” than do CEOs with no track record for innovation.

 

I fully agree with these five tips for how to innovate; and want to provide my insights on them:

Five Tips On How To Innovate

1) Question (The Status Quo)

HBR points out that Michael Dell famously created Dell with the question:

“Why do computers cost five times the cost of the sum of their parts?”

Innovators are excellent at asking questions that challenge the status quo such as:

  • Why not try it this way?
  • Why do you do things the way you do?
  • What if you tried this new thing or stopped doing some old thing?
  • What would you do if failure was not an option?

2) Observe

Innovators are strong at observing people and details.

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Tuesday, March 23rd, 2010

What Is Thought Leadership & How Do You Apply It To Your Business?

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I met an interesting woman, Natalie Wood (not the deceased actress) who’s focusing her career on the subject of Thought Leadership. I asked her to cover the topic with me in a Q&A.

Read on to learn more about what thought leadership is; why businesses should care; examples of thought leadership in business; and how to leverage thought leadership marketing.

Natalie Wood of The Thought Bank

Natalie Wood of The Thought Bank

Q: What is your definition of Thought Leadership?

We see Thought Leadership as the new paradigm for how businesses market themselves and build brand. Thought leadership evolves through the efforts of both individuals and businesses making the commitment to develop a deeper understanding of the specific forces shaping their industry.

Why is Thought Leadership important?  Gautam Ghosh of Accenture claims that… “Simple, great thought leadership means never having to ‘pitch’ or ‘sell’ for business.” You become a trusted advisor, counselor and partner, not just a vendor.

Today, Thought Leadership is becoming the new standard for how people and companies communicate their value to the world and their customers.  This includes B2B strategy, marketing, product development, customer support and sales. Companies can no longer avoid the impact of Thought Leadership and what it means to their market and to their customers.

Thought Leadership enables companies to build strategic value in their industry that transcends ad campaigns, PR efforts or marketing initiatives. These types of contributions can directly affect a company’s success and brand.

Q: Why should businesses care about Thought Leadership?

Many companies are now taking on thought leadership branding initiatives as a part of their own intellectual branding campaigns. The main reason a business should care about Thought Leadership ties back to how their company is viewed by the marketplace.

Thought Leadership, as defined by RainToday.com… “centers on earning trust and credibility.” Thought Leaders get noticed by offering something different—information, insights, and ideas, for instance. Thought Leadership positions you and your company as an industry authority and resource and trusted advisor by establishing your reputation as a generous contributor to your industry.”

A growing number of companies have started to realize that thought leadership is a core component of becoming a successful market leader.  Most companies aspire to having their brand seen as one of the more knowledgeable and innovative in their field or industry.  And, many may want to be seen as the market leader, but haven’t put together a strategy or resources needed to make this happen.

Thought Leadership has the ability to help you and your company:

  1. Raise Company visibility and credibility to the world
  2. Educate and reach customers
  3. Enlighten the media on your contributions to the market
  4. Inspire customers and partners to connect with you in new and meaningful ways

As the business world changes, thought leadership is playing a greater role in how many of these changes are taking place. People are becoming a part of the new era of brand development. Many product focused brands are also now transitioning to people focused brands through social media, communities and increasingly through thought leadership.

People represent how a product and company are perceived by their customers and the market at large. A company’s credibility, market reach, standards of conduct and recognition are affected by the value and brand of their people. Thought leadership is the new marketing platform for people and the companies they represent.

A key finding from the survey: Engaging Global Executives: Ten Megatrends in B2B Marketing, shows that 56% of companies consider Thought Leadership as their second biggest objective for B2B marketing.  That’s number two behind building new business as the top priority in the next 3-5 year (Economist Intelligence Unit, 2008).

Q: What is “Thought Leadership Marketing,” a term I’ve heard used in this area?

Thought Leadership marketing is focused on helping a company position itself as a “thought Leader” in a specific marketplace.  The strategy supports the company’s core initiatives while at the same time promoting its intellectual corporate branding.

Thought Leadership marketing programs are a part of a larger thought leadership strategy and help raise a company’s visibility with their key customer base and market.

Thought Leadership seems a little nebulous until you understand the value it brings companies. According to Dana VanDen Heuvel of the Marketing Savant Group, the value of Thought Leadership marketing includes:

  1. Prospects put themselves further into the sales cycle – shorter sales cycles,
  2. Changes the pattern and terms from how customer buy from you,
  3. Diminishes Price Resistance and
  4. Prospects experience your value before buying.

Another way to define Thought Leadership is “the recognition from the outside world that the company deeply understands its business, the needs of its customers and the broader marketplace in which it operates.” Elise Bauer.

A great way to put Thought Leadership into context is to think of it as the economic impact of ideas and content.  Thought Leadership is both macro and micro.  It helps define and influence the macro forces of markets while shaping micro forces of product innovation, marketing, and resource management of companies.

By understanding the full impact of Thought Leadership companies can align the macro forces shaping their markets with the micro strategies of their company for smarter product and marketing decisions.

As a result Thought Leadership marketing has now emerged as a new and growing standard for how companies leverage this important medium to develop market awareness, reach prospective customers and evolve into smarter, more effective organizations.

Thought leadership marketing programs include the following:

Research and Publications: Thought leadership content through market research, executive surveys and interviews. Client sponsored white papers, executive summaries and advertorials.  These are not company product or service white papers, but rather research regarding specific industry pain points and future trends.

Online Marketing, PR and Lead Generation: Integrated thought leadership marketing campaigns that tie into corporate branding and advertising campaigns with specific thought leadership messaging. Developing recognition and influence through the public dissemination of important industry research and information, incorporating podcasts, webcasts, online polls, social networking and online lead generation tools.

Custom Events: Multi-sponsored or smaller single sponsored thought leadership events that focus on specific topics and bring together various related industry thought leaders to debate and discuss current issues. These types of events help sponsors to gain visibility with senior-level target audiences and can offer invaluable networking opportunities. Event programs are often tied into larger thought leadership marketing programs and provide additional content for marketing campaigns via multi-channels that include online branding, distributed video and research. These type of events range in size from 50 to 300 plus attendees.

Thought Leadership marketing help companies be seen as more knowledgeable and innovative in their industry. These types of marketing programs enable companies to share knowledge with their clients and public, along with delivering programs that speak to the corporate social responsibility needs of their company’s branding initiatives.

Q: Please provide some examples of Thought Leadership in the business world (including the Internet) and the impact it had on each business.

Companies such as Cisco are focused on educating prospects through thought leadership. At Cisco every executive must establish and develop themselves as a Thought Leader through public speaking, blogs, whitepapers, etc.

“Once thought leadership is established, the rest of the industry, the media, academia, government policymakers and the broader business community turn to that company for ideas and for insights into where things are going.” Mark Peshoff, Senior Director of Cisco’s Executive Thought Leadership

Both Cisco and HP have several divisions with resources and programs dedicated to ongoing thought leadership research, marketing and events; many of which tie into their corporate citizenship and thought leadership branding initiatives.

One example is Cisco’s large scale thought leadership program for Cisco’s Global Education Group .

Over the past several years, Cisco’s Global Education Group has partnered with a number of leading corporate, government, educational and endowment groups to help improve education on a global basis.  They put together a 21st Century School Initiative to help improve education, technology infrastructure and the skills needed for employment in the 21st century.

Cisco also created internally a job skills training group called The Cisco Networking Academy which has classes set up in 160 countries to help teach people IT/networking skills.

In January 2008, Cisco, Microsoft and Intel sponsored a “project to research and develop new approaches, methods and technologies for measuring the success of 21st-century teaching and learning in classrooms around the world.

The Assessment and Teaching of 21st Century Skills (ATC21S) project is focused on defining those skills and developing ways to measure them.”

As a part of this they also created an Education Leaders’ Program and Education 3.0, what they call, “systematic approach towards education transformation.”

Another example of Cisco’s Thought Leadership research on education is a white paper they sponsored entitled, “Global education 20/20: What role for the private sector?

This white paper was developed for a thought leadership event, held by The Economist in 2009 in New York, called Education 20/20: Creating partnerships to educate the global workforce of the future and used specifically for Cisco’s thought leadership education marketing and partner outreach programs.

A 21st century education system is governed and managed with the ultimate goal of maximizing learning outcomes for all students. There are transparent processes in place to communicate and implement decisions, develop and monitor curriculum, sustain the budget, and procure resources.

Additionally, policies and procedures are implemented to enable these education institutions to use data to drive school standards and accountability while stimulating and managing innovation.

Finally, school learning is recognized as embedded within and dependent on an ecosystem of partners that support learning and/or provide other essential children’s services (e.g., health, social services).

The entire system is a learning organization with a supportive culture that promotes ambitious and innovative approaches to teaching and learning. Leaders throughout the system champion and model the 21st century educational vision and work with well-trained and -supported teachers.

Emphasis is placed on the recruitment and retention of both principals and teachers through carefully designed outreach efforts and training programs. A 21st century system explicitly promotes a culture of high expectations, respect, collaboration, and shared accountability.

These efforts have helped Cisco become a market leader in the area of education through their thought leadership programs which include research, marketing, events and partnership programs. All of which tie back directly into their corporate citizenship and thought leadership branding initiatives, and which incorporate their company’s main services and product offerings.

Other companies such as Crest Toothpaste, HP, Qualcomm, Coke and other Fortune 500s view Thought Leadership as imperative to their success.  What are some of the ways companies become Thought Leaders?  There are many, but to name a few… whitepapers, blogs, public speaking, cause marketing (Pepsi’s “refresh” program is a great example), PR, events, case studies, and social media.

The list goes on. But what is most important is a company’s vision and the thoughts and ideas of its people.

The ability of a company to harness the collective thoughts, ideas and vision of its people is very powerful and often inspiring.  But without a proper Thought Leadership program these visions and ideas are trapped inside companies.

They don’t see the light of day or they are crafted into PR sound bites that only reveal a fraction of what a person or company is thinking.  That is why many companies are now implementing Thought Leadership programs to help guide and develop their executives to help align their ideas with company vision and innovation.

As I mentioned above, Cisco’s thought leadership programs have been on a much larger scale than most mid-size businesses will ever employ, however, the basic principals still apply. Thought leadership programs can range in size, apply to any industry and be successful if they are part of a company’s core business and branding strategy.

If you want to be seen as a thought leader in your market, it’s important to come up with a thought leadership strategy that will enable your company to develop and deliver expertise over the long run to help your clients and the marketplace improve.

This can produce rewards for your business that can be exponential to both your company and clients along with the marketplace as a whole.  That is why Thought Leadership holds the hope of inspiring something great.

The world is watching for guidance, ideas and suggestions.  Customers and prospects want to know that you understand the pressures and challenges that affect them just as well as you know your own challenges.  And yet, they also want you to inspire them, show them the way to a better tomorrow and to a better future.

Q: If someone wants to get in touch with you, how should they do so?

The Thought Bank is a Thought Leadership Consulting Firm in San Francisco, CA where we help companies and senior executives implement Thought Leadership practices for the benefit of their brand and overall marketing.

We combine our experience in various industries along with capabilities across a wide set of business functions to provide clients with comprehensive thought leadership programs and events that build company market success and brand.

Our mission is to help companies become more effective thought leaders and increase their visibility and client engagement in the world as corporate social citizens.

The Thought Bank is currently doing thought leadership events on The Power of PlayThe evolution of games and their growing impact on business and social communities and The Future Paradigm of Housing Finance in the US. 

For further information, please contact me bu phone at 415-425-7124 or by email at info@thethoughtbank.com

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Saturday, March 20th, 2010

How To Process Credit Cards In-Person With No Merchant Account (It’s Called “Square”)

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I believe the new payment application SquareUp (some call it just “Square”), which allows anyone to accept credit cards in person, is a game-changer in business.

I just bought a book using it from author Dom Songalla (pictured below) at a conference we both attended — it was simple yet powerful.

Rob Kelly & Dom Sogalla at The Twitter |140 Conference

Author Dom Sogalla Shows Rob Kelly the SquareUp-Enabled iPhone

Dom simply popped his credit reader reader  into the phone jack of his iPhone; and then swiped my credit card for $20.

A Square-Up Enabled iPhone

A Square-Up Enabled iPhone

Here’s the receipt I received via email (note that it shows me the location of my purpose):

Receipt from SquareUp Transaction

The whole thing really took just three steps:

  1. The author swiped my credit card on his iPhone
  2. I signed my signature with my finger on his iPhone screen
  3. He typed in my email and emailed me my receipt

And the beauty is that Square does not require you (the seller) to have a merchant account to accept credit cards — and there appears to be just one fee (2.9% of the transaction amount).

Others, including PayPal’s new Bump iPhone App, are also getting in the market of exchanging money between phones.

I like Square chances as much as anyone’s as it has smart folks like its co-founder Jack Dorsey (creator of Twitter) and Board member Gideon Yu (previous executive at Facebook, YouTube, Yahoo) behind it.

Click here for tweets from some Square advisors.

And since SquareUp is still in beta, you’ll have to go to the bottom of Square’s home page and give your email address to get in line to receive the card reader.

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Saturday, March 13th, 2010

How To Raise Money From A VC: Insider Tips

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I’m sitting in on a packed breakout session at the SxSW conference with Charlie O’Donnell of First Round Capital.

If you’re interested in creating technology-driven businesses, you should know about Charlie.

I like Charlie because he’s worked both sides of the fence (founder/CEO of businesses and venture capitalist); and he’s extremely well-networked .

His current employer First Round helps entrepreneurs with their early financing (before the big venture capitalists get involved).

Note: If you want to know more about the different stages of raising money, check out The 5 Major Stages of Startup Funding article I wrote.

Think of them as a “feeder fund” to the larger investors. If you can sell First Round on investing in you, you’re about 100X as likely to get larger funding from more venture capitalists.

Here are some tips he shared with entrepreneurs:

Ask For Advice (not money)

He says: “If you ask for advice (from venture capitalists), you get money…if you ask for money, you get advice.”

Vet Your Product/Product Management is Key

Most startups have a biz person and a techie…but it’s the translation in the middle that’s key (someone to focus on what the milestones are, priorities, etc. for the product).

Simple things like getting wireframes of your products nailed down before you start coding can be a huge time saver.

“The best ideas are the ones that nobody thought would work.”

Everyone is good at coming up with feature ideas…it’s a lot tougher to pick the ones to prioritize on.

So, be very clear about who is in charge of product management.

Things Take Longer And Cost More Than You Think

Building a company will take three times as long and cost twice as much; or take twice as long as cost three times as much.

Have 2-Week Plans (not 6-month plans)

Focus on Small/Short Milestones

This is tougher but will make you more efficient. Again, this is where someone with product management is key.

Hiring Is Harder Than You Think

On-boarding is harder and takes longer than you think. A programmer, for example, takes awhile to get to know your systems.

Venture capitalists, O’Donnell adds, don’t always help: “VCs look only at top-level employees…and never ask details about lower level hires.”

Embrace Failure

Find people who have failed in your space because they’ve learned the most — don’t just talk to people at a successful company like Twitter.

You Might Consider Selling Customers First, VCs Later

It’s way easier to ask a venture capitalist for money than it is to ask a customer…but you should focus on getting sales from customer to increase your leverage with VCs.

For example, Square Space in New York focused on generating sales (as opposed to raising money from VCs) and is now in a position of greater control with raising money from VCs.

Launching Products/Businesses

PR is really hard to do…there are not that many people who do it well.

You may get a bunch of public relations on the launch day, but it will be much tougher to get PR a few months later (unless you have a new milestone) — again, having greater frequency of milestones is a theme here.

Building a Startup Is All About “Unfair Advantages”

A key leverage point with VCs is your “unfair advantages.”

Examples of unfair advantages:

  1. You worked at the #1 competitor and you know the inner-workings of that company like noone else.
  2. You have visibility in the community and folks will want to work with you.

For example, Gary Vaynerchuk can jump on his Wine Library video blog right now and get a developer hired immediately — that is a good “unfair advantage” he has over his competition.

3 Must-Haves To Attract A VC

  • Solid Team
  • Market The VC Wants to Play In
  • A Strong Product

Caution: Don’t Idealize Strategic Investments

Don’t assume that when a strategic investor puts money in you that you’ll get everything from that company that makes sense.

He points to his startup Indeed raising $1 Million from the New York Times and assuming that the newspaper would promote Indeed on its highly-trafficked Jobs Web pages (which it wouldn’t do).

Start The Wind-Down Process Early

When you’ve raised venture capital and your business isn’t working out, leave yourself enough time to sell your assets.

That’s because the “wind-down” period of a business goes very fast and selling your remaining assets takes time and energy.

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Saturday, March 13th, 2010

How To Make a Six-Figure Income From Blogging (Darren Rowse of ProBlogger)

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I’m here at the South By Southwest (SxSW) conference listing to blogger Darren Rowse give a talk on blogging.

If you are interested in blogging, you should listen to what Rowse says; his three blogs are among the highest ranking Web sites, according to Alexa:

Here are some tips he shared on turning your blog into a six-figure a year business (all specifics and examples are related to his Digital Photography School) :

1) Start With Content

  • Don’t start with making money in mind.
  • Focus on value
  • Don’t forget beginners — E.g. when Darren wrote a post on how to hold a digital camera it ended up getting huge traffic.

How frequent should you post : He believes you should post at least one to two blog articles a day (to build up your content library for the search engines to index).

In addition to posting content himself, he hires other writers who he pays  about$60 (U.S.) per post.

His other bloggers can come up with their own topics though Darren also gives them ideas on topics.

2) Promotion

Ask yourself: Where are my readers gathering already (and then go and find them).

Chances are your audience is hanging out already in places like Twitter, Facebook and forums.

3) Community

He recommends using forums in addition to blogs. While Darren and I chatted later in the day he told me that forums appeal to a different community than his blog does.

However, he pointed out that Google and the search engines don’t crawl his forums content as much as they do his blog content.

He also recommends engaging the audience in polls — For example, a member of his photo site asked for advice on how to photograph their dying grandma and they generated 100+ responses.

4) Capture Contacts — Find a way to stick visitors to your site

Of the 410, 000 subscribers, over 300,000 are email (versus 100,000 for RSS feeds)

Traffic is three times the volume of normal days when he sends an email update out. Advertising revenue goes up too.

5) How to Monetize Blogs

In years 1 and 2, he used ad networks and affiliate markets.

In years 3 and 4, he hired 50 writers initially (from his audience) (now it’s 12 writers writing 50 posts per week).

He says he generated $13,000 in Amazon affiliate revenues last month.

How he monetizes his blogs now:

  • Sell ads directly (to Adobe, Lenovo, etc.)
  • Higher-end affiliate marketing (ebooks, training courses (they pay 30% to 50%)
  • Recently sold 10,000 of one ad partners ebooks within a couple of months
  • Launched his own ebooks (for $29.97) and sold $70,000 in ebooks within a couple of weeks.
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Monday, March 8th, 2010

The Near Future of Twitter's Ad Platform, Google Buzz, iPad, Etc. (According to Mashable's Ben Parr)

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I’m at the 140 | The Twitter Conference and Ben Parr (@BenParr), Co-Editor of Mashable, is sharing his thoughts on social media with Steve Broback, (Host of the conference).

Here are some highlights:

The top three social media platforms business should care about:

  1. Facebook
  2. Twitter
  3. YouTube

Two newer social media platforms to keep an eye on:

  1. FourSquare — It’s a mobile application that let’s people know where you are and what you’re doing.
  2. Google Buzz — It’s already bigger than Twitter in terms of users (at 40MM+).

Upcoming Changes In Google Buzz

If Google doesn’t create a standalone version of Buzz, it won’t succeed.

You will see Google Buzz withing Google Apps/Google Docs within the next few months.

“I’m bullish on it — it has strong features and big user base. I’m getting better engagement on Google Buzz than Facebook.”

Google Buzz API is coming — Google will throw APIs out like they’re candy.

Twitter’s Ad Platform

Twitter’s plan is to probably launch an ad platform this month, probably focused on search. This will probably involve in-stream ads and developers to integrate it and share revenue with it…so applications (such as HootSuite or TweetDeck will carry ads).

Twitter is cash-flow positive due to the “Firehose” (allowing Yahoo, Google, Bing and 6 or 7 search startups to index the Twitter content/data).

Tips & Tools For Businesses Use To Maximize Value of Twitter

  • Figure our your goal (have a specific goal in mind). Examples of goals: Monitor discussion, promote products, build a stronger brand, etc.
  • Recommends these tools for businesses: CoTweet, HootSuite and WildFire (whatever tool you use, make sure it has analytics)

iPad

The second version of Apple’s iPad will likely include a camera.


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Monday, March 8th, 2010

Two Tips To Get More Followers on Twitter (from 140 | The Twitter Conference)

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I’m sitting here at the “140 | The Twitter Conference” in Seattle, WA and Jason Preston of Parnassaus Group mentioned these two tips for growing your followers on Twitter:

Contests

“Contests work” — Offer a prize. Ask people to follow you and retweet the contest.

The cost to acquire a Twitter follower has averaged about $7 per 100 followers in Preston’s experience.

Twitter Contest Examples

Jason said Parnassus Group used a contest for what the t-shirt for a Twitter conference should say (with the winner being offered a free conference pass and t-shirt).

As part of the contest, you had to tweet your submission and follow the conference the twitter account (@tweethouse).

Parnassus got a couple of hundred followers as a result of the contest (which again he says worked out to about $7 cost to acquire each Twitter follower

Another example: Someone offered a MacBook Air and got 2,500 followers (that cost to acquire a Twitter follower was closer to $1 per follower)

Follow People Using Tools Such As TweepSearch

Searching for people who are relevant to you or your business (based on location or products) and follow them. Reason: There are a lot of people who have their accounts set up to automatically follow you back.

If you’re targeted on your outreach you will land on the inbox of people interested in your business. He recommends TweepSearch (in beta).

With TweepSearch you can type in search term and easily find people to follow (and then hopefully they follow you back). If you’re looking for followers from a certain location, type in the search term followed by the location (e.g. “Jewerlry: San Francisco”)

I’ll keep posting other info from this event.

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Saturday, March 6th, 2010

It’s The Freeconomy, Stupid!: Free As a $300 Bil. Business Model

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I finished a few books on my trip to Europe last week and one of them –  Free by Chris Anderson — was chock full of stats that I found myself dog-earing throughout my flight.

“Free” is a must-read if you’re passionate about the Internet, or just business in general.

I’m gonna keep this simple and just list out some good nuggets (which are mostly stats).

Let the “freeconomics” begin!

The “Freeconomy” Is An Estimated $300 Billion Market

The Free Economy is roughly a $300 billion per year market.

By his own admission, Anderson defines this loosely, including revenue generated from businesses driven by giving away most of their products or services (e.g. TV, Radio, online advertising Web sites, etc.).

Two sub-economies have emerged in place of money on the Web (though they can later lead to money)

1) Reputation Economy – This is best measured by Google’s PageRank which rates on a scale of 1 to 10 how important each Web site (and each page on a Web site) is, according to Google’s secret algorithm.

2) Attention Economy – This is best measured by the traffic a Web site receives (traffic being measured by number of visitors and page views)

To calculate the Economic Value of your Web site (i.e. how to help turn your Reputation & Attention into CASH), Anderson suggests this formula:

(The traffic your page rank brings from Google’s search results for any given term) X (The keyword value for that term)

note: while he doesn’t clarify how to calculate “keyword value,” I’d suggest you could use AdWords.Google’s CPC)

General Web Statistics Related to Freeconomics

  • The net deflation rate of the online world is nearly 50% (whatever it costs a business to run a Web site now will cost half as much in a year).
  • The Web has around one trillion unique URLs, according to one Google estimate
  • There are 12 million active blogs
  • It costs around $.25 to stream one hour of video to one person (a year from now it will likely be around  $.15)

User-Generated Content Statistics

  • Around 1 in 10,000 Wikipedia visitors are active contributors.
  • YouTube has around one in a thousand users uploading their own videos (meaning the rest are just downloading (viewing) videos
  • Most online volunteer communities thrive when just 1% of them contribute

Two Cool Social Media Statistics

  1. The average number of friends for MySpace members is around 180
  2. Facebook applications receive around a $1 CPM ($1 per 1,000 page views) for advertising revenue.

Interesting Free-Related Trials & Experiments Anderson Mentions

The Case of $.15 Cent Truffles Versus Cheap to Free Hershey’s Kisses

Dan Ariely (Predictably Irrational) took two kinds of treats: Lindt truffles from Switzerland and Herhey Kisses and offered them for sale to students:

When they priced the Lindt truffles at $.15 and the Kisses at $.01

  • 73% chose the truffle
  • 27% chose the Kisses

When they lowered both prices by $.01 so that the truffles were $.14 and a Kiss was free

  • 69% chose the Kiss

Conclusion: While both products’ prices were lowered by the same amount ($.01), the introduction of free as an option reversed the students’ preference.

How Does “Name Your Own Price” Work As A Business Model?

Matt Mason, author of Pirate’s Dilemma, allowed visitors to his Web site to name their own price upon checkout of downloading his ebook (with $5 via Paypal as the default option)

Results: 6% of the 8,000 people who downloaded the ebook agreed to pay an average of $4.20 each (generating a couple of thousand dollars) (interesting note: Mason estimates he received $50,000 in lecture fees as a result of the publicity of his exercise).

Hope you enjoyed some of these freeconomics!

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